Stocks gained again this week. Beginning on Monday, European stocks soared in relief that in France a centrist candidate will be heading to the election runoff and is expected to get about 65% of the vote. Strong 1st quarter earnings growth contributed to the rally as did the proposed tax changes. Generally good economic data was disturbed on Friday by a weak Q1 annual GDP growth rate. However, we’ve seen this movie before with a weak 1st quarter followed by improving 2nd and 3rd quarters raising questions about the seasonal adjustments used by the Commerce Department. The markets seemed to take this in stride with only a modest decline on Friday.
Despite still high inventories of oil in the U.S., Sarah Kent, of the International Energy Agency, wrote that with global new oil discoveries at a record low we could see shortages as early as 2020.
Commodities had little change for the week and Treasury yields rose slightly. The dollar fell against the euro and the pound but rose against the Japanese Yen.
In the numbers this week:
- The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose 5.8% in February from the previous February on strong demand and low construction.
- The Commerce Department reported
- New home sales rose 5.8% in March from February. From last March, new home sales were up 15.6%.
- Durable goods orders rose 0.7% in March after rising a revised 2.3% in February and 2.4% in January. A decline in automotive orders was more than offset by civilian aircraft. Excluding transportation altogether, orders fell 0.2% in March.
- The Gross Domestic Product in the 1st quarter rose at an annual rate of 0.7%. A slowdown in consumer spending, a reduction in inventories and a decline in government spending all contributed to the weak growth. However, tax refunds have been issued later this year which may have delayed Q1 consumer spending. Also, business investment rose.
- The Energy Information Administration’s Weekly Petroleum Data report is here wpsrsummary.
- The Energy Information Administration reported
- Weekly field production of crude oil increased 13,000 barrels per day in the prior week.
- Natural gas in storage rose 74 Bcf from the prior week.
- Baker Hughes reported that oil drilling rigs rose 9 to 697. Gas drilling rigs rose 4 to 171.
- The Labor Department reported Initial claims for unemployment rose 14,000 to a seasonally adjusted 257,000. The four-week moving average of claims, designed to smooth out weekly fluctuations, fell 500 to 242,250.
- The European Central Bank announced no change to its negative interest rates and no change to its bond purchases scheduled to run at least through the end of the year. While acknowledging that risks are receding as growth improves, there is still little evidence that inflation will rise to its 2% target.
- The Bank of Japan also left their negative interest rates unchanged but, while citing an improving economy, expressed a pessimistic outlook for inflation which is close to zero.
- Factset reported that with 58% of the S&P 500 companies reporting the blended earnings growth rate is 12.5% above a year ago.
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Loren C. Rex, CFP®, AIF®, MA Erik Smith
President Managing Partner
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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results