RECAPPING LAST WEEK
U.S. equity indexes extended their April rally, rising modestly last week as the S&P500
and Nasdaq reached fresh record highs, led by Big Tech after stellar earnings boosted
share prices. Ten of eleven S&P500 sectors finished higher on the week – materials
were the sole loser. As expected, the Fed held rates steady, but votes on policy were
more divided than in past meetings. Core PCE, the Fed’s preferred measure of inflation
rose 0.3% MoM and 3.2% YoY. This reading was surprisingly tame given oil prices, but
still complicated the future path of Fed policy. Speaking of oil, futures prices rose
another 7% last week, clearing $110/barrel before settling near $100 as inventories in
the U.S. dropped by 6.2 million barrels. The dollar index opened the week higher when
U.S.–Iran talks stalled, but the buck faded through the week, helping gold, silver, and
bitcoin hold steady. U.S. growth metrics remained strong, with Q1 GDP improving to
2.0% from Q4 2025’s 0.5% level. Durable goods and capital shipments showed
continued momentum, and ISM Manufacturing PMI remained in expansion territory at
52.7. All 5 of the Mag 7 stocks that reported earnings last week beat expectations, but
only AAPL, AMZN, and GOOGL saw a positive impact on their stock prices. Labor
market data was mixed: at 189k, jobless claims were at a 50-year low, yet the ADP
employment reading pointed to a slowdown. Consumer confidence ticked higher and
while housing prices are still up year over year, they were flat MoM. Overseas, the Bank
of Japan increased inflation forecasts but stopped short of indicating any rate hikes.
Europe continues to lag. Although Germany posted modest growth, the broader
Eurozone GDP disappointed, and unemployment ticked up to 6.2% giving the ECB more
freedom to act than the U.S. Fed currently enjoys. Canadian and U.K. central banks held
rates steady, and an increase in Australian inflation proved it’s a global issue that belies
the argument that financial markets need interest rate cuts.
THE WEEK AHEAD
U.S. labor market data will be the primary macro catalyst, with April nonfarm payrolls
due Friday. Before the key-risk event, the market will receive several labor-market
“previews”, including JOLTS job openings, ADP private payrolls, and weekly jobless
claims. ISM Services will be closely watched after manufacturing data showed resilient
activity but rising input costs. The Fed backdrop remains important even though there’s
no major policy decision on the calendar. The ”higher for longer” narrative could
eventually become problematic for equity markets, but so far, those markets have
persevered. Fewer companies will report earnings this week, but we’ll still hear from
more than 100 S&P constituents, including Advanced Micro Devices (AMD), Strategy
Inc (MSTR), Disney (DIS), Uber (UBER), Coinbase (COIN), and McDonald’s (MCD). While
it sounds counterintuitive, foreign markets may focus most on whether strength in the
U.S. dollar and the “good growth” narrative will survive the arrival of a wide range of
U.S. data. If the trend of U.S. outperformance and weakness from China and Europe
persists, it will strengthen the dollar and squeeze global liquidity. And while the
importance of the Iran situation seems to be fading, its impact—especially on oil prices—
still bears watching. The week closes with four different Fed members’ speeches, and
investors will listen carefully for any indications of future central bank policy.
(Schwab)
