Stocks Rise is Busy News Week
Stocks continued on an upward trajectory this week amid strong earnings, the Federal Reserve holding interest rates steady, a good jobs report today and the expectation that Emmanuel Macron will win the French election on Sunday. For the week, the Dow increased 0.3% while the S&P 500 added 0.6%. The Dow closed above 21,000 for the first time since March 3rd and only the 4th time ever.
April Jobs Report – There was a lot of focus on today’s jobs report after the March report disappointed investors. The US economy added 211k net new jobs in April and the unemployment rate declined to 4.4%. Through the first four months of the year, we’ve averaged 185k new jobs a month, essentially identical to the 183k average in the first four months of last year. This reports follows last week’s disappointing US economic growth and suggests the economy is stronger than some had feared. Read More
French Elections – In the latest polls, Emmanuel Macron holds a 20+ point lead over Marine Le Pen. Most business leaders favor Macron because he has supported reducing labor laws and remaining in the EU. The election takes place on Sunday and the market is fully expecting a Macron victory, so a Le Pen shock would like cause volatility next week. However, it seems the populist wave hitting many parts of the West won’t continue in France this weekend.
Federal Reserve – The Federal Reserve voted this week to keep interest rates unchanged while saying conditions remain positive for future rate increases. I think we’ll see two additional rate increases this year which will be a good development for savers. We could all benefit from higher interest rates in savings accounts and other fixed income investments. Any slowdown in the economy could delay rate increases, but at this point we are tracking in a good direction for higher rates. The Fed meets again in June and I expect we’ll see a 0.25% increase in the Fed Funds rate. Read More
Oil moved sharply lower, decreasing 5.9% to close at $46.30/barrel. The OPEC production cuts expires later this month and OPEC is meeting on May 25th to discuss whether to continue, increase or end the production caps. The yield on the 10-yr Treasury increased, closing at 2.35% from 2.28% a week ago. The average rate on a 30-yr fixed rate mortgage ticked lower to 4.02% from 4.03% last week.
|10-yr Treasury (∆ in bps)||2.35||7||(10)|