5/6/24 Weekly Market Commentary

5/6/24 Weekly Market Commentary

May 06, 2024

What happened last week…         

The Federal Reserve kept interest rates at 5.25% to 5.50%, as expected. It is the sixth consecutive meeting in which rates were left unchanged, dating back to July 2023. In a statement after the decision, the Federal Open Market Committee (FOMC) reiterated, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” Fed Chairman Jerome Powell cautioned, “Inflation is still too high. Further progress in bringing it down is not assured and the path forward is uncertain.” However, Powell also said, “I think it’s unlikely that the next policy rate move will be a hike. I’d say it’s unlikely.” The next FOMC meeting will occur June 11-12. According to the CME FedWatch Tool, as of May 3, there is a 91.8% probability that rates will again remain unchanged in June. The first interest rate cut is forecasted to potentially occur in September.

 

The ADP employment change beat expectations (183,000) but decreased to 192,000 from the upwardly revised 208,000 (from 184,000). The unemployment rate landed higher than expectations (3.8%) as it increased to 3.9% from 3.8%. Nonfarm payrolls missed expectations (243,000) as it decreased to 175,000 from the upwardly revised 315,000 (from 303,000). Average hourly earnings month-over-month missed expectations (0.3%) as it decreased to 0.2% from 0.3%.

 

The manufacturing PMI for April missed expectations (50.0) as it decreased to 49.2 from 50.3, which had previously snapped a streak of 16straight contractionary readings (below 50). The non-manufacturing PMI for April fell below expectations (52.0) as it decreased to 49.4 from 51.4, which now snaps a streak of 15 straight months of an expansionary reading. It is the first contraction since December 2022.

 

According to FactSet, as of May 3, 80% of S&P 500 companies have reported earnings with 77% having a positive EPS surprise and 61% having a positive revenue surprise. The blendedearnings for the S&P 500 is 5.0%, which would be the highest growth rate since Q2 2022 (5.8%). The blended revenue for the index is 4.1%, which would be the 14th straight quarter of growth. For the stocks in the Rockline portfolios, as of May 3, 72% of companies have reported earnings with 87% having a positive EPS surprise and 68% having a positive revenue surprise.


Happening this week...

Earnings season is still full steam ahead for Q1 earnings reports.


Thanks for reading!

- The Rockline Team