At least for now the financial markets appear to be looking past the stalemate in the Middle East as both the United States and Iran continue the long process of a negotiated peace. There are several reasons for this, including a resilient American consumer (see Retail Sales below) which feed into robust corporate earnings fundamentals, the prevalence of a “buy the dip mentality” that has been in place for more than fifteen years, the perception that price hikes in oil are temporary and finally, the expectations of an eventual deescalation or even better, a permanent end to the war.
For the week, the S&P 500, U.S. Total Market Index and the NASDAQ Composite all closed Friday at record highs, this despite a minor upward moves in the yield on the 10-Year U.S. Treasury Note from 4.26% to 4.31%.
· According to data from Torsten Slok, Chief Economist at Apollo Global Management, “for the first time, foreign private investors hold more US Treasuries than foreign central banks. This is a structural shift that makes the Treasury market increasingly sensitive to the return expectations of price-sensitive private capital.” (Source; Apollo Global Management).
· This past Thursday Meta Platforms (META) announced that it was laying off 10% of its workforce or approximately 8,000 people. This move was followed by a buyout offer to some 8,750 employees at Microsoft (MSFT), the first voluntary offering in its history. Many are wondering if this is just the start as Artificial Intelligence (AI) begins to become more widely adopted by business. According to an article published by Jenifer Elias on CNBC website, “as of this week, over 92,000 tech workers have been laid off so far in 2026, according to Layoffs.fyi, bringing the total to almost 900,000 since 2020.”
· The Department of Justice dropped its criminal probe into the handling of the renovations at the Federal Reserve by Fed Chair Jerome Powell, a move that could perhaps clear the way for Shaker High School graduate Kevin Warsh to become the new chair. The appointment has been blocked by Republican Senator from North Carolina, Thom Tillis, who has said he would block any of the nominees the President puts forward until the legal threats against Powell have ceased. Tillis perceives the investigation merely as a political move from the President and without merit.
· Mortgage Rates Slide As Spring Springs! According to the Federal Home Loan Mortgage Corporation (FreddieMac), “the 30-year fixed-rate mortgage declined again this week to 6.23%. Rates currently stand at their lowest level in the last three spring homebuying seasons. This improvement, coupled with a pickup in purchase applications and refinance activity, as well as an increase in monthly pending home sales, underscores signs of improving momentum in the market.”
· This Coming Week is the Most Important of the Quarterly Earnings Season as a number of significant companies across a multitude of industries are reporting. Watch both Wednesday and Thursday as the strength of the AI trade will be tested as Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMXN), Meta Platforms (META) and Apple (AAPL) report over those two days. Sprinkle in Visa (V), Mastercard (MA), Eli Lilly (LLY), Merck (MA), Caterpillar (CAT), Chevron (CVX) and Exxon Mobil (XOM) and you see what we mean.
Economic Data That Drove Market Sentiment This Past Week…
· The University of Michigan reported that its Final April Reading of Consumer Sentiment rebounded from an all-time preliminary April reading of 47.6 to 49.8 (-6.6% y/y) but has fallen from a final March level of 53.3. The final April expectations component rose to 48.1 (-7.0% y/y) from a preliminary April 46.1 but is down from a final March 51.7. Lastly, the final April current conditions component rebounded to 52.5 (-5.9% y/y) from a preliminary April 50.1 but slipped from a final March 55.8. According to the Survey of Consumers Director, Joanne Hsu, “decreases in sentiment were seen across political party, income, age, and education.” (Source, Univ of Michigan)
· Initial Claims for Unemployment Benefits for the week-ended April 18th rose 6,000 to 214,000 from 207,000 which were revised up by 1,000. Meanwhile, the four-week moving average rose 750 to 210,750 from 210,000, which was revised up by 250. Continuing claims for the week-ended April 11th rose 12,000 to 1,821,000 from 1,809,000 the prior week. The continuing claims four-week average rose 1,250 to 1,812,250 from 1,811,000. (Source, U.S. Department of Labor)
· Retail Sales surged 1.7% in March (4.0% y/y), after rising 0.7% in February. Spending on Motor Vehicle & Parts rose 1.2% during February (4.0% y/y) after sliding 0.7% in January. Retail Sales Excluding Motor Vehicles & Parts rose 1.9% during March (5.5% y/y), after rising 0.7% during February. Two key components of this report, Sales at Gasoline Stations rose 15.5% during March (18.1% y/y) after rising 1.3% in February as Restaurant and Drinking Place Sales edged 0.1% higher during March (2.4% y/y) after rising 0.5% in February. Also of note was the 1.0% rise in sales of general merchandise (2.5% y/y) as well as the 0.7% rise in sales at building materials & garden stores (2.6% y/y). (Source, U.S. Census Bureau)
Economic Reports scheduled to be released this week, include the following – on Tuesday, April Consumer Confidence; on Wednesday, March Orders for Durable Goods, February U.S. Housing Starts and Building Permits; on Thursday, Initial Claims for Unemployment Benefits, March Personal Income and Spending, February Index of Leading Economic Indicators and First Quarter Gross Domestic Product; and, on Friday, April Purchasing Manufacturing Index from the Institute for Supply Management.
Several potentially market moving companies are scheduled to report earnings, to include Visa (V), Coca-Cola (KO), Novartis (NVS), AstraZenaca (AZN), Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), AbbVie (ABBV), Eli Lilly (LLY), MasterCard (MA), Caterpillar (CAT), Apple (AAPL), Merck (MRK), Linde (LIN), Chevron (CVX) and Exxon Mobil (XOM).
