Weekly Market Commentary April 6th to April 10th

The conflict with Iran dominated headlines once again as the week ended with an on-again, off-again, back on-again cease-fire. This type of geopolitical volatility certainly isn’t market friendly, but the overall recent trend is one of optimism that the conflict could be winding down.

Economic data released this week centered on inflation with spiking energy prices, due to the previously mentioned conflict, cementing an inflation U-turn for the consumer. The year-over-year Consumer Price Index (CPI) for March came in at 3.3% (up from 2.4% last month) with the main driver being the 21.2% increase in the price of gasoline. When stripping out food and energy, things were a bit muted with the year-over-year Core CPI coming in at 2.6% (2.5% last month). The Fed’s favorite inflation measure, the Personal Consumption Expenditures (PCE) index, which is still being delayed due to the government shutdown, was released for February and showed modest improvement. Look for March’s release by the end of April and expect an increase on par with the CPI.

Elsewhere in the economy, the week started with the Institute of Supply Management’s (ISM) Services Index. This number measures growth in the services industry and has been strong lately. March came in accordingly at 54.8, which represents 21 straight months of expansion. Durable Goods Orders dropped more than expected at -1.4%. Weekly Initial Jobless Claims, a favorite of ours for predicting the direction of labor markets, are still hovering in the low 200k’s. And lastly, fourth quarter GDP was adjusted downward to +0.5% from +0.7%, with blame continuing to be placed on the 43-day government shutdown.

In the markets U.S. stock indices were mixed. Both the S&P500 (6,817) and the Dow Jones Industrials (47,916) finished higher on the week at +2.9% and +2.5% respectively; but tech stocks got hammered again and the NASDAQ (22,903) closed down 5.4%. In fixed income, shorter yields fell on the week with the 10-year Treasury closing at 4.32%.

Next week’s important economic releases include producer prices (PPI), Existing Home Sales, Housing Starts, and Building Permits; along with several Fed governor speaking engagements which can provide insight into the direction of interest rates.