Notes Along the Path: Market Update for Week 18

Gordon Achtermann |

Market Recap


The S&P 500 index rose 0.5% this week, starting May on a positive note, as investors grew more hopeful the Federal Reserve's policy-setting committee will start cutting rates after April's US jobs data came in weaker than expected.

The S&P 500 ended Friday's session at 5,127.79, marking its second weekly gain in a row and bringing its year-to-date gain to 7.5%.

The index ended April with a 4.2% loss, the first monthly drop since October 2023. The decline came amid increasing fears that it may be a while before the Federal Open Market Committee feels comfortable lowering rates. The FOMC on Wednesday held benchmark interest rates steady for the sixth straight time, citing a lack of further progress on inflation in recent months.

Still, investors were optimistic on Friday after government data showed the US economy added fewer jobs than expected last month while wage growth eased. Total nonfarm payrolls climbed by 175,000 in April versus the Bloomberg consensus estimate of a gain of 240,000. The unemployment rate came in at 3.9%, up from 3.8% the month prior, which was the market's expectation for April. Average hourly earnings growth slowed to 0.2% from 0.3% in March; expectations had been for wage growth to stay at 0.3% in April.

Quarterly earnings reports continued to come in largely above expectations, although revenue hasn't been coming in above estimates as much as earnings. Among the 185 S&P 500 components that released quarterly reports this week, almost 77% had better-than-expected earnings and 58% had better-than-expected revenue, according to Bloomberg data.

By sector, utilities led this week's climb with a 3.4% rise, followed by a 1.6% increase in consumer discretionary and advances of 1.5% each in real estate and technology.

The utilities sector's gainers included shares of AES (AES), which ended the week 8.4% higher amid the company's report of higher-than-expected Q1 adjusted earnings per share. AES reaffirmed its 2024 adjusted EPS guidance.

In consumer discretionary, shares of Garmin (GRMN) jumped 16% amid the navigation device maker's report of higher-than-expected fiscal Q1 results.

The consumer discretionary sector also got a boost from (AMZN), whose shares climbed 3.7% amid stronger-than-expected Q1 results.

However, four sectors fell this week, led by energy, which lost 3.4%, and financials, which shed 0.6%.

The energy sector's drop came as crude oil futures fell. Decliners included shares of APA Corp. (APA), which fell 9.9% as the company reported Q1 adjusted earnings per share below analysts' mean estimate despite revenue coming in slightly above the Street view.


Bond Market Update

Last week, I wrote: "The curve has not changed much in the last couple of weeks as the market has not decided if we will see any rate cuts by the Fed this year."

This week, 10-year Treasuries confirmed a drop that had just started. Over the last seven trading days, they've dropped from a yield of 4.73% to 4.43%. I think the market has decided that, yes, we will see a rate cut this year.

As always, we should not be too concerned either way, as our portfolio is designed for the long run and diversified between stocks and bonds.



Next Up

Next week's earnings calendar features Vertex Pharmaceuticals (VRTX), Walt Disney (DIS), Duke Energy (DUK), Uber Technologies (UBER) and Airbnb (ABNB).

Economic data will include April consumer credit and a preliminary reading on May consumer sentiment.


Stay the Course!


All the Best,

Gordon Achtermann, CFP®