Updated 04/21/2025

Our Perspective on the Markets Last Week:

U.S. markets stumbled over the holiday shortened week as volatility remained elevated. The price change of select U.S. indexes for the week was: S&P 500 (-1.50%), Dow (-2.66%) and the Nasdaq (-2.62%). The 10yr. Treasury note yield fell -0.14 percentage points to 4.34%.

Markets experienced notable volatility last week, influenced by a blend of corporate earnings, economic data, Federal Reserve communications, and of course, tariff uncertainty.

Strong earnings from major financial institutions highlighted resilience in the banking sector and encouraged investor confidence early in the week.

However, sentiment turned much more cautious mid-week after Nvidia announced it expects a $5.5B revenue loss in Q1 due to new U.S. export restrictions on its H20 AI chips to China. This led to an -8.5% drop in Nvidia's stock and triggered a broader sell-off in the technology sector. Other semiconductor companies, including AMD and ASML, also reported potential revenue hits from similar export limitations.

Equity values took another leg lower on Wednesday afternoon following remarks from Fed Chair Jerome Powell that President Trump's tariffs could exacerbate inflation while slowing economic growth. He also indicated that the Fed is hesitant to cut interest rates amid these challenges, throwing some cold water on hopes for monetary policy support in the near term.

Retail sales in March leapt 1.4% higher, notching the largest monthly increase in more than two years, as consumers pulled forward purchases of big-ticket items before potential tariff price increases.

Looking Ahead:

While the U.S. and China’s trade war will remain the top focus, corporate earnings reports will have a greater influence on sentiment as some mega-cap tech, along with several other key companies, are set to report this week.

In terms of reporting companies, Tesla and Alphabet (Google) earnings will be the headline events. GE, Verizon, AT&T, Boeing, Pepsi, IBM, Proctor & Gamble, 3M, and Service Now will also be heavily influential.

Market participants will pay attention to commentary from Federal Reserve officials scheduled throughout the week for further hints regarding monetary policy direction, especially given recent discussions about inflation and interest rate trends.

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Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
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No Change
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INCREASE +25 bps
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Current Target Rate is 4.25% - 4.50%

Select Economic Data Releases

*Colored icon denotes a new data release.
Gross Domestic Product

The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  Q2 GDP grew at a 2.1% annualized rate but consumer spending turned out to be weaker than originally reported. The growth was driven by robust consumer and business spending.  U.S. GDP increased at a 2.0% growth rate during Q1.  GDP was trimmed again to a 2.6% pace during Q4.  The increase in consumer spending was reduced in the latest estimate to 1% from 1.4% last month and an original 2.1%.  The annual growth rate remained at 2.1% for 2022.

Employment Data

The U.S. added a bigger-than-expected 228,000 jobs in March, but the unemployment rate ticked higher to 4.2%.  U.S. nonfarm payrolls increased by 151K in February and the unemployment rate ticked up to 4.1%.  Nonfarm payrolls grew by 143K in January, a significant drop from the upwardly revised December gains.  Although it was shy of the average monthly gain of 166K observed throughout 2024, the unemployment rate edged down to 4.0%.  The U.S. economy added 307K jobs in December, blowing past analysts' expectations of 160K new jobs. The unemployment rate ticked down to 4.1% from 4.2% and average hourly pay increased at a solid 0.3% rate from November.  U.S. employers added 227K jobs in November, exceeding forecasts of 214K.  Unemployment rose to 4.2% from 4.1%. Relative to October, November’s annual wage growth was unchanged at 4.0%.  October U.S. nonfarm payrolls rose by just 36K, far less than the anticipated 125K gain. The unemployment rate held steady at 4.1%, as expected..  The September jobs report was revised down to 173K from 254K.  Employers added 111K jobs in August and the unemployment rate dropped to 4.2%.  The U.S. added a mild 114K new jobs in July and unemployment hit a nearly 3-year high of 4.3%.  

Retail Data

Retail sales in the U.S. jumped 1.4% in March as shoppers sought to buy larger ticket items such as cars before tariffs could raise prices.  The February retail sales increase of 0.2% was les than anticipated, but a 1% increase in receipts from the "control group" provided some reassurance that the consumer is still solid.  Retail sales fell in January by -0.9% after consumers took a breather from holiday shopping season and a severe cold snap kept people indoors.  Sales at U.S. retailers advanced a seasonally adjusted 0.4% in December with most parts of the country reporting “strong holiday sales that exceeded expectations,” according to the Federal Reserve’s Beige Book.  For 2024, retail sales grew by 3.0%.  The November retail sales jumped 0.7% on strong new car and truck buying and online shopping.  However, receipts at restaurants dipped by -0.4% from October.  Retail sales for October rose by 0.4% and receipts in September were revised higher to a 0.8% increase.  August retail sales grew by 0.1%.  July retail sales surged 1%, blowing past estimates for a 0.3% rise.  June retail sales were revised lower to -0.2% from the previous month, but that was still better than the forecasted decline of -0.4%. If you remove auto and gas sales from the figure, retail sales rose by 0.8% month-over-month.  Sales at U.S. retailers rose a mere 0.1% in May, suggesting Americans are feeling the weight of lingering inflation and high interest rates.  In addition, April retail sales were revised down to a -0.2% contraction.  

Housing Data

The report of new home sales for March will come this week.  Sales of existing homes also rose in February but remained slightly below the 2024 pace at this time last year. Existing home sales rose 4.2% during the month to a 4.26M pace.  Sales of newly built homes slowed to 657K annual pace in January, from the 671K pace in December.  Building permits in January rose 0.1% above the revised December rate of 1.48M, but was 1.7% below the January 2024 rate of 1.51M.  Pending home sales, which refer to the number of contracts signed to purchase a home, fell 5.5% in December while sales of newly built homes rose to an annual rate of 698K.  Sales of newly built homes in the U.S. rose by almost 6% in November to an annual rate of 664K.  Sales of previously-owned homes rose 4.8% to an eight-month high annual rate of 4.15M in November, as home buyers seized relatively lower mortgage rates.  Existing-home sales rose 3.4% to an annual rate of 3.96M in October but are expected to remain sluggish for the time being.  Sales of existing homes are still struggling while new homes sales remain strong. The annualized rate for sales of existing homes fell -1% to 3.84M in September, a 14-year low, but sales of newly built homes rose by 4.1% month-over-month.  Sales of newly built homes in the U.S. fell -4.7% to an annual rate of 716K in August, from an upwardly revised 751K in the prior month.  Pending-home sales also ticked up in August as a big drop in mortgage rates prompted some home buyers to act.  Construction of new homes rose 9.6% in August to a 1.36M annual pace. Building permits, a sign of future construction, rose 4.9% to a 1.48M rate.  

Leading Indicators

The March update to the LEI comes this week.  The LEI in February fell by -0.3% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  The leading indicators of the U.S. economy fell -0.5% in September because of weakness in a few key industries such as housing and manufacturing, but not enough to suggest any sign of major trouble.  The leading indicators for the U.S. economy dropped -0.2% in August, the sixth consecutive decline.  The leading index for the economy fell -0.6% in July, the fifth straight monthly decline.  The leading index for the economy fell again in June (-0.2%) for the fourth month in a row, reflecting a slowdown in U.S. growth since the beginning of the year.  The Conference Board said the index of leading indicators dropped -0.5% in May, “doesn’t currently signal a recession."  The leading indicators for the U.S. economy fell -0.6% in April, pointing to ”serious headwinds to growth.”  The index fell again in March.  The decline was -0.3%.

Inflation

Consumer and producer inflation unexpectedly contracted in March with the CPI falling -0.1% during the month and PPI declining -0.4%.  Headline CPI cooled to 2.4% annualized.  Headline PCE inflation of 0.3% in February was a slightly faster pace than expected.  Core PCE also came in slightly hotter than estimated at 0.4% for the month.  Consumer and producer inflation came in soft for February.  Consumer inflation rose 0.2% (0.3% expected) during the month while producer prices were flat, compared to an expected rise of 0.3%.  In January, the Personal Consumption Expenditures (PCE) price index rose by 0.3% from the previous month. Over the past 12 months, the index increased by 2.5%, slightly down from December's 2.6% rise.  Core PCE registered a 2.6% increase, marking a decrease from December's 2.9%.  The CPI for January indicated a 0.5% month-over-month increase and PPI rose by 0.4%.  Both were hotter-than-expected.  The PCE index rose 0.3% in December, marking the biggest increase since last April.  The producer-price index, where the seeds of inflation are planted, rose a mild 0.2% in December and the core rate of change for wholesale prices was 0.1%. Consumer inflation in December was 0.4%, driven largely by higher prices for flour, pork and eggs, while the cost of energy jumped 2.6%.  Excluding food and energy price changes, the core CPI for December was 0.2%.  

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