April Market Commentary

US stocks edged up in April on strong earnings reports. With 55% of S&P 500 firms reporting first quarter earnings, 80% have topped analyst expectations. It is the widest margin since the third quarter of 2008. However, some companies have said they do not foresee the current level of earnings growth continuing this year. The Trump administration delayed aluminum and steel tariffs on key allies allowing additional time for a deal to be negotiated. Employers hired 103,000 workers in March, which was well below expectations. The unemployment rate remained at 4.1% for the sixth straight month, and wage growth rose 2.7%. Retail sales rose 0.6%, reversing recent declines. The first reading of first quarter GDP showed the economy grew at a 2.3% pace. That rate topped estimates, but was a slowdown from the fourth quarter. US stocks ticked up 0.38% in April, cutting their decline for the year to 0.27%.

Foreign stocks gained over the month on corporate earnings and accommodative central bank policy. The European Central Bank left interest rates unchanged at their April meeting and renewed their pledge to continue asset purchases through September. Economic numbers have weakened recently as manufacturing activity was lower in 21 of 30 countries in March, led by countries in Asia and Europe. Industrial output fell 1.6% in Germany in February, retail sales slowed in March, and business and economic sentiment in the country have shown worsening growth expectations. At an April meeting, large oil producers elected to continue to limit production through the end of the year and possibly into next year. The production limits in place since November of 2016 have worked to reduce inventory and drive up the price. Oil ended April at $68.57 a barrel, near its highest level in three years. Emerging markets significantly trailed developed markets for the month. In April, international stocks gained 1.68% and are up 0.53% for the year to date.

Bonds fell in April as interest rates climbed on increasing inflation expectations. Several inflation measures released over the month indicated prices have risen. Minutes from the Fed’s March meeting showed members had greater confidence the economy would reach the 2% inflation target in the next year and stated they planned to continue to raise rates gradually. The 10-year Treasury yield rose to 2.94%, up from 2.74% to start the month. For the month, shorter-term bonds outpaced longer-term bonds, with muni and credit bonds being the top performing sectors. The broad bond market declined 0.74% in April and is now down 2.19% for the year to date.