Equity markets were mixed during the week, falling slightly from their record all-time highs reached earlier this month. The S&P 500 was flat, while the NASDAQ rose 0.4%. Small caps underperformed large caps, falling 1.3%. Bond indices were down 0.5% during the week.
Housing Metrics for April Weaker than Forecasted
Housing starts for the month of April came in lower than forecasted. Mortgage rates have begun to rise again, dissuading some home buyers. However, new housing starts have recently been supported by a shortage of existing homes for sale.
Existing homes’ sales for April came in lower than forecasted (4.1 million versus the 4.2 million expected), falling 1.9% compared to last month and continuing its slide from February. All regions of the United States saw sales fall, with the Northeast region exhibiting the largest drop in sales. Housing inventories continued to grow; however, they continue to remain at very low levels.
United States Industrial Production Slips
Various production metrics for April have shown recent weakness. United States factory production unexpectedly fell in April, primarily due to a fall in vehicle output. Additionally, industrial capacity utilization for April came in lower than expected for April and is currently below the 50-year average, indicating manufacturers are not utilizing their facilities to the levels they were previously. Manufacturing currently represents a smaller percentage of the economy than it did in prior decades but remains an important component of economic activity.
There are fears that consumer spending, which has been very resilient in the post-COVID era, is starting to wane. Corporations such as McDonalds and PepsiCo stated that they are starting to see some weakness in consumer spending. Metrics show that delinquencies in credit card and auto loan debt are rising.
First Quarter Earnings Season Coming to a Close
First quarter earnings season is wrapping up and results appear to be strong across all sectors. Just over 75% of companies who have reported have beat analysts’ expectations. Year-over-year earnings growth for the first quarter is expected to be 7.4%, led by the Communications and Consumer Discretionary sectors. Calendar year 2024 earnings growth is expected to be 10.4%, with the Communications and Consumer Discretionary sectors expected to continue to lead growth.
As companies report their earnings, many also give earnings guidance for the upcoming quarters. Despite many companies beating analysts’ current earnings expectations, those companies that did not raise their earnings outlook for upcoming quarters lagged the market. However, those companies that raised their earnings outlook for upcoming quarters outperformed the market. Investors are rewarding those companies that are exhibiting expected earnings growth for 2024.
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Sources: BTC Capital Management, S&P Dow Jones Indices, IHS Markit, FactSet
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