Market Update Monday 1st May 2023

Weekly Market Update Monday 1st May 2023

A string of strong earnings reports helped U.S. stocks end the month on a high note, with the broad S&P 500 Index, blue-chip Dow Jones Industrial Average, and tech-focused Nasdaq all notching their second-straight day of gains Friday, despite a looming meeting by the Federal Reserve’s rate-setting committee next week.

U.S. GDP report confirmed that the economy is losing momentum

Last week’s release of the latest U.S. GDP report confirmed that th e economy is losing momentum, with GDP slowing to 1.1% in the first quarter, compared with 2.6% in the prior quarter and 3.2% in the quarter before that.

Looking under the hood, the news was mixed. Consumers continue to show resiliency, with household spending increasing at a healthy 3.7% rate last quarter, a notable acceleration from the previous period and well above the average of 1.7% over the prior four quarters. Elsewhere, however, signs of a slowdown were more evident in the first quarter. Business investment declined materially, including a sharp drag from inventories, which aligns with recent manufacturing surveys and signals that companies are tightening their belts. Additionally, residential investment fell in the quarter, though there are signs of stabilization in the housing market, and mortgage rates have come off their peak.

Markets get a boost from better-than-feared corporate earnings results

Corporate earnings announcements were also in the spotlight last week, with markets getting a boost from better-than-feared results. With roughly half of S&P 500 companies having reported quarterly results, earnings for the period are down 1.7%, while revenues are up 4% versus the same quarter a year ago. Of the 267 companies that have reported earnings to date for 23Q1, 77.9% have reported earnings above analyst estimates. This compares to a long-term average of 66.3% and prior four quarter average of 73.5%.

US Markets lead weekly returns

In the US the S&P 500 Index was up 0.8% and the tech focused Nasdaq Composite was up 0.7% for the week. Shares in Europe fell as fears that interest rate increases might tip the economy into recession intensified. The pan-European STOXX Europe 600 Index ended 0.50% lower whilst the UK’s FTSE 100 Index lost 0.55%. Chinese stocks ended mixed ahead of a five-day holiday as Beijing reaffirmed its supportive policy stance, assuaging concerns about an uneven economic recovery. The Shanghai Stock Exchange Index rose 0.67%, while the blue chip CSI 300 pulled back 0.09% in local currency terms.

Government Bond Yields Endure volatile week

U.S. Treasury yields modestly decreased amid volatility ahead of the following week’s Federal Reserve policy meeting, where an additional quarter-point rate hike is widely expected. The 10-year Treasury yield was down about 9 basis points at 3.437%. Core eurozone government bonds and UK Gilts also endured a volatile week as investors debated inflation prints and slowing economic activity.