WEEKLY MARKET SUMMARY

Global Equities: Strong corporate earnings and good jobs data kept markets in rally mode during the week, propelling the S&P 500 to a 2.9% gain and recovering all the damage incurred since the April 2nd “Liberation Day” selloff. Friday was the ninth consecutive daily gain for the S&P 500, the longest positive streak since 2004. The Nasdaq Composite was bolstered by strong Q1 results from big tech and led domestic large cap indices with a 3.4% weekly advance, but market gains were broadly distributed with the Dow Jones Industrial Average also up sharply at 3.0% for the week. Small Cap stocks, which have lagged during the trade war drama, gained 3.3% during the weekly session. Foreign developed market stocks gained 2.4% while Emerging markets rose 3.6% on rumors that China may be open to discussions with the US on tariffs.

Fixed Income: Strong jobs data was enough to counter recession concerns following a weak Q1 GDP print, leaving yields relatively unchanged during the week. The 10-Year US Treasury yield closed the weekly session slightly above 4.3% after falling as low as 4.13% mid-week. High yield bonds rose on Friday to end the week positive, up 0.2%.

Commodities: US West Texas Intermediate (WTI) Crude prices continue to fall, dipping to $58.25 as of Friday afternoon, their lowest level since 2021. Despite a Trump administration mandate to “drill baby, drill”, low prices are causing US drillers to cut back on output, with the Baker Hughes rig count falling for the first time in three weeks. The active rig count fell 6% during the week to bring the number of active US rigs to its lowest count since December 2021.

WEEKLY ECONOMIC SUMMARY

GDP Contracts: As expected, US Gross Domestic Product shrank in the first quarter, contracting -0.3%, which marked the weakest economic growth since Q1 of 2022. The negative GDP was primarily attributed to a surge in imports as businesses sought to front-run tariffs, although decreased government spending was also a small contributor to the decline.

April Jobs Report: US nonfarm payrolls were stronger than anticipated in April, rising 177,000 with the unemployment rate holding steady at 4.2%. Average hourly earnings rose 0.2%, which was slightly below forecasts. Markets cheered the news, which came two days after the negative GDP print and was seen as a possible indicator that the US could avert a recession, provided we see a de-escalation of the trade war. The good jobs data was accompanied by reports that China may be willing to respond to US overtures on tariff negotiations, furthering market optimism.

Earnings Update: Big tech was in the spotlight during a busy earnings week, with Microsoft (MSFT) and Meta (META) delivering huge earnings beats and more importantly, offering strong guidance and maintaining aggressive cap-ex spending. Microsoft shares soared over 10% following earnings, the stock’s best post-earnings move since 2015. Fellow tech behemoths Amazon (AMZN) and Apple (AAPL) followed but couldn’t match their peers’ performance. Amazon’s cloud growth and guidance disappointed, while Apple warned of $900 million in costs incurred by tariffs.

CHART OF THE WEEK

The Chart of the Week shows the S&P 500 index year-to-date performance, noting the steep decline, and now subsequent recovery, stemming from the April 2nd “Liberation Day” imposition of tariffs. While there has been some softening of rhetoric and rumblings of potential deals, nothing concrete has emerged between the US and its trading partners. Still, the market has rallied thanks to an initial 90-day reduction in tariffs and is now reacting positively to corporate earnings and guidance. While some companies have cut or withdrawn guidance, many others are maintaining their expectations and signaling the ability to weather the trade war disruption. This has allowed the market to recover all of the “Liberation Day” damage and given investors a degree of confidence for the time being, although we will need to see some kind of progress soon to prevent recession fears from reigniting.