Consumer Sediment On and Off the Field
ROBARE & JONES ON THE MARKETS
The S&P 500 index fell 2.8% this past week and is down this week following a mixed quarterly earnings reports and signals that the Federal Reserve's policy-setting committee may raise interest rates by a half-percentage point in May.
This marks the S&P 500's third consecutive weekly decline. With just one week of April remaining, the index is now down 5.8% for the month to date. It is down 10% for the year to date.
This week's drop came as US companies' quarterly earnings reports continued to come in with mixed results and The Federal Reserve's Federal Open Market Committee may raise rates in May by a half-percentage point. Such a move would be larger than the quarter-point increase that was made at the last meeting. The potential for more aggressive monetary tightening has contributed to some trepidation from investors.
In communication services, shares of Netflix (NFLX) tumbled 37% this week as the video-streaming company reported mixed Q1 results and a sharp decline in subscriptions. Netflix led the way for all sectors falling other than real estate, up 1.2%, and consumer staples, up 0.4%.
The economic calendar for next week will be heavy on housing and inflation data. Among the reports expected, March new home sales will be released Tuesday, followed by March pending home sales on Wednesday, and March personal consumption expenditures or PCE on Friday.
Let's take a look at the markets from this past week!
Consumer Sentiment Volatility!
Consumer Sentiment Index is down 25 percent from April of last year. It’s a remarkable change when you consider what has happened in the economy over the last 12 months. For example:
- More people are working. The unemployment rate was 3.6 percent in March, down from 6.0 percent in March of last year, according to the Bureau of Labor Statistics.
- Fewer people are filing for unemployment. Last week, we learned the 4-week average of unemployment claims was 177,250, down from 610,000 in 2021, according to the Department of Labor.
- The economy continues to grow. The Manufacturing PMI®, which measures growth in the manufacturing sector, was 57.1 percent in March, the 20th consecutive month of economic expansion. That’s a slower pace of growth than last year’s 64.7 percent. However, readings above 50 percent mean the economy is growing.
- Wages are higher. Average hourly earnings have risen 5.6 percent over the last 12 months, according to the March unemployment report. Hourly earnings was 6.5 percent for retail trades, 6.6 percent in professional and business services, 7.9 percent in transportation and warehousing, and 11.8 percent in leisure and hospitality.
- Inflation is higher, too. As we’ve mentioned before, there are a lot of different ways to measure inflation. No matter which way you look at it, inflation is significantly higher than it was last year. The headline Consumer Price Index showed prices were up 8.5 percent in March, while core inflation (excluding food and energy prices) was 6.5 percent.
- Company earnings are strong. Despite inflation and geopolitical turmoil, companies were profitable during the first quarter of 2022. So far, 79 percent of the S&P 500 companies have reported better-than-expected earnings.
What's been changing economy lately? Let us know!
