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Although there wasn’t a lot of news released this week, what did come out provided some key insight into what consumers are thinking about the economy.
Perhaps the biggest news announcement in the United States came on Friday with the release of the University of Michigan’s Consumer Sentiment and Inflation Expectations reports. Consumer sentiment fell to 67.4 compared to 77.2 a month ago, and the May figure represents the most pessimistic that respondents have been since November 2023. Prior to the release, it was expected that consumer sentiment would be 76.2.
In addition, inflation expectations increased from 3.2% to 3.5%. Essentially, respondents believe that the inflation rate will be 3.5% at this point in 2025. It’s important to note that this was the preliminary figure for May, which means that consumer sentiment or inflation expectations may be higher or lower than indicated right now.
On Thursday, unemployment claims data was released and revealed that 231,000 people requested benefits over the past seven days. This compares to an expected 212,000 claims and 209,000 claims recorded last week. When combined with last week’s softer than expected jobs report, it could be another sign that the economy is starting to slow in a meaningful way.
The S&P 500 was up 1.24% this week to close at 5,222. It would start the week at 5,157 before steadily climbing to 5,235 on Friday morning. The market would make most of its gains after testing the weekly low on Wednesday morning, and it is currently about 25 points off the yearly high that was set back in March.
The Dow would finish the week up 1.75% to close at 39,512. Like the S&P, the Dow would make a weekly low of 38,704 on Monday before spending the rest of the week gaining ground. The high of the week was established on Friday morning when the index hit 39,534. As with the S&P 500, the Dow is also within striking distance of the yearly high of 39,807 set during the final days of March.
Finally, the Nasdaq would finish the week higher closing at 16,340, which was an increase of 0.55% over the past five trading days. The market would make a low of 16,229 on Wednesday before reversing and making a high of 16,443 on Friday morning. Unlike the other markets, the Nasdaq would spend almost the entire week in a trading range as opposed to trending in one direction or the other.
Important events did take place internationally. In Australia, it was announced that the country’s main interest rate would remain at 4.35%, and in a statement, it was revealed that interest rates could remain elevated for the rest of 2024 and beyond.
This contrasts with the European Central Bank (ECB) that is expected to cut rates at least once this summer and could cut rates aggressively as the year continues. The Bank of England (BOE) on Thursday kept the nation’s interest rate at 5.25% and also mentioned that rate cuts could be forthcoming in the near future.
Finally, on Friday morning, it was revealed that Canada’s interest rate remained steady at 6.1%. Furthermore, it was revealed that the country had a net gain of 90,000 jobs over the past month.
The upcoming week should be a more interesting one for traders as inflation data is set to be released on Wednesday. Retail sales data is also set for release on Wednesday while the Producer Price Index (PPI) is also set to be made public on Tuesday. It’s expected that monthly inflation will remain at .4% while yearly inflation will tick down to 3.4%. Federal Reserve Chairman Jerome Powell is also scheduled to talk on Tuesday, which could add some volatility to the markets.
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The markets rose over the past week as the Fed made its most recent interest rate decision on Wednesday and the nonfarm payroll figures were released on Friday.
Although the Fed and the nonfarm payroll numbers were the top stories of the week, the first major news release came out on Tuesday. On that day, the quarterly Employment Cost Index came out and found that employment costs rose 1.2 percent over the first three months of 2024. This was higher than the expected 1 percent and the .9 percent figure seen in the final quarter of 2023.
On Wednesday, the ADP version of the nonfarm payroll report was made public and found that the economy added 192,000 news jobs in the past month. Also on Wednesday, the JOLTS report came out and revealed that there were 8.49 million jobs available in the United States. The ISM Manufacturing PMI came in at 49.2 percent, which indicates that the sector is experiencing a period of contraction.
The Fed Funds Rate was kept steady at a range of 5.25 percent to 5.5 percent during their meeting on Wednesday afternoon. In a statement, Fed Chair Jerome Powell said rates were going to remain higher for longer until there was confidence that inflation was heading back toward the 2 percent target.
Although there is some speculation that interest rate hikes might be on the table, Powell said that this is unlikely to happen. On Thursday, unemployment claims were released, and over the past seven days, there were 208,000 requests for benefits compared to an expected 212,000.
On Friday, it was revealed that average monthly hourly earnings rose .2 percent compared to an expected .3 percent. The unemployment rate rose to 3.9 percent compared to an expected 3.8 percent. The economy added 175,000 jobs over the past month, which was well below the expected 238,000 and slightly more than half of the 315,000 created last month. Also on Friday, the ISM Services PMI was released and came in at 49.4 percent.
The Dow was up .93 percent this week to finish at 38,675. The low of the week was hit on Tuesday afternoon when the index dipped to 37,822, and the high of the week was reached on Friday morning when the index soared to 38,770.
Like the Dow, the Nasdaq also gained ground this week as it closed up 1.47 percent at 16,156. It would stay in a relatively tight range reaching a low of 15,578 on Wednesday before reaching a high of 16,158 on Friday.
Finally, the S&P 500 finished the week higher by .44 percent to close at 5,127. The market made its low of the week of 5,015 on Wednesday morning and made its high of the week on Friday afternoon when it hit 5,132 before sliding back.
In other international news, Canada announced on Tuesday that its GDP increased by .2 percent on a monthly basis. On Wednesday morning, the Swiss central bank announced that inflation increased by .3 percent on a monthly basis compared to an expected increase of .1 percent.
The upcoming week is going to feature another round of key news releases both domestically and internationally. On Thursday, unemployment claim data will be released as usual while Friday features the University of Michigan releases preliminary consumer sentiment and inflation expectation information. Internationally, Australia is scheduled to release its cash rate decision on Tuesday morning while Canada announces its employment change and unemployment data on Friday.
The final full week of April saw a variety of impactful new releases that will likely shape fiscal policy over the next several months. The first major release came out on Tuesday when the Flash Manufacturing PMI and Flash Services PMI figures were made public. Manufacturing came in at 49.9 percent while services came in a 50.9 percent, which were both below expectations.
It was believed that each of these indexes would come in at 52 percent prior to their release. On Wednesday, durable goods orders data revealed that core durable goods orders had increased .2 percent on a monthly basis. Meanwhile, all orders were up 2.6 percent over that same time period, which beat expectations of a 2.5 percent increase and were nearly double last month’s figure of 1.3 percent.
On Thursday, advance gross domestic product (GDP) data for the first quarter of 2024 was released. It found that the economy grew 1.6 percent over the first three months of the year, which was below the expected 2.5 percent growth and was well below the 3.4 percent rate of growth over the final quarter of 2023.
Also on Thursday, unemployment claims data came out and revealed that 207,000 people had requested benefits over the past seven days. This compares to an expected 214,000 claims prior to the news breaking.
Finally on this day, pending home sales data was released, and in the last month, such sales increased by 3.4 percent. This was compared to an expected growth rate of .3 percent and was nearly double last month’s figure of 1.6 percent. An increase in the number of home sales may indicate that there is a greater willingness to sell, which could help balance supply and demand pressures. Ultimately, this could lead to a moderation in housing prices that has been a major contributor to inflation.
On Friday, the Core PCE Index showed that prices changed by .3 percent over the last month. This was in line with expectations and in line with last month’s figure. Although the data shows that the economy is still running hotter than expected, many believe that the figure shows that overall conditions may not be as bad as they seem.
Finally, the University of Michigan released its revised consumer sentiment and inflation expectation figures for the latest reporting period. Consumer sentiment came in at 77.2 while it was expected that inflation will be at 3.2 percent a year from now.
The S&P 500 was up 2.36 percent this week to close at 5,099. It would make its low of the week on Monday morning when it dipped to 4,971 about an hour after the opening bell sounded. It would make its high of the week on Friday afternoon when it hit 5,113.
The Dow was also up more than 200 points to close at 38,239 for the week. This represented a gain of .56 percent over the last five trading days and was buoyed largely by a strong move on Friday that saw the index gain more than 153 points. On Tuesday, the market made its high of the week at 38,337 and made its low of the week on Thursday when it hit 37,769.
Finally, the Nasdaq would gain 550 points to finish at 15,927, which was a gain of 3.5 percent for the week. The index hit its weekly low of 15,281 on Monday morning while it hit its high on 15,971 on Friday.
In international news, the Bank of Japan (BOJ) decided on Thursday night to keep the country’s interest rate at .10 percent. However, it was said that rates could continue to go up if economic conditions led to more inflation. Australian authorities on Tuesday night revealed that inflation ticked up to 1 percent on a quarterly basis and 3.5 percent on an annual basis. In Canada, retail sales were down by .1 percent on a monthly basis, which was below expectations of a gain of .1 percent.
Next week will feature a number of news releases including the ADP and BLS nonfarm payroll change figures. It’s believed that the economy added 243,000 jobs during the last month, and it’s also believed that the unemployment rate will remain unchanged at 3.8 percent. In addition, the Fed will make a rate decision on Wednesday. It’s expected that it will remain at 5.5 percent.
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