All data is for the week ended April 29, 2022
Stocks
US equities were down sharply last week, with the benchmark S&P 500 dropping 3.26%, the Russell 2000 declining 3.94% and the NASDAQ falling 3.92%. Overseas, the developed markets (MSCI EAFE) also declined, by 2.17%, while the emerging markets (MSCI EM) managed a 0.09% increase. Each of the 11 sectors in the S&P declined, led by consumer discretionary and real estate.1
Fixed Income
The Federal Reserve will meet this week and most investors are anticipating a 50 basis point (or 0.50%) increase to the Federal Funds rate as the outcome. The decision to raise rates is part of a well-telegraphed plan by the Fed to slow inflation in a period of good employment and ongoing supply shortages. The 10-year treasury benchmark ended the week with a 2.89% yield, down 1 basis point from the prior week.2
Commodities
While weekly US oil production is gradually rising, demand from the European Union appears to be rising faster as a result of the Russian invasion of Ukraine. Last week Germany and then the European Union indicated they want to phase out imports of oil from Russia completely over the next few months after initially indicating that energy would not be a part of their sanctions. West Texas crude oil closed at $104.69 per barrel, up 2.6% for the week.3
Economic Data
Gross domestic product (GDP) fell at a 1.4% annualized rate last quarter versus consensus expectations for a 1% gain. That was the first quarter-over-quarter decline since the pandemic recession nearly two years ago and followed a 6.9% advance in the prior quarter. Growth in consumer spending and business fixed investment was overwhelmed by the trade deficit, particularly from increased imports by businesses worried about supply shortages.4
Orders for U.S durable goods — products meant to last at least three years — advanced 0.8%, rising for the fifth time in the past six months. On a year over year basis, total new orders rose 12.6%. The increase in core orders, a measure of business investment, was the most positive sign.5
New home sales accelerated their decline in March to -8.6% while the median sales price climbed to a record peak of $436,700. On a year over year basis, new home sales were down 12.6%.6
Initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 180,000 for the week ended April 23, suggesting that the U.S. economy is putting the Omicron wave of the coronavirus behind it.7
Company News8
Apple Inc, (AAPL), a G33 and Core Select holding, reported revenue and earnings that exceeded expectation led by gains in its services business (now 20% of total revenues). The board raised its dividend by 5% and increased its share buyback program by a hefty $90 billion.9 Shares were down 2.6% for the week.
Lennox International Inc. (LII), a G50 holding, declined 13.6% after reporting revenue and earnings that beat expectations. Investors drove the share price down over concerns about the housing market for this maker of heating and cooling systems for residential and commercial buildings. 10
Meta Platforms Inc. (FB), a G33, Contrarian Choice and Core Select holding, reported profits that exceeded expectations. Also, the gauge of daily average users returned to gains and beat expectations after a rare decline in the prior quarter. Shares rose 8.9% for the week.11
Did you know…
Cinco de Mayo (also known as Gradient Investments president Mike Binger’s birthday) is the widely celebrated anniversary of the Mexican victory over French forces at the Battle of Puebla on May 5, 1862. This victory was achieved despite the fact that the Mexicans were far outnumbered by the French.
Mariann Montagne, CFA
Portfolio Manager
Sources:
1 JP Morgan Weekly Market Recap 5-2-22
4 Bureau of Economic Analysis 4-28-22
5 US Census Bureau 4-26-22 and table 1
8 All weekly changes in company stock prices: Yahoo Finance
9 Apple Inc. press release 4-28-22
