ClearWater Market Commentary as of April 29th, 2022

Here is the ClearWater Market Commentary as of April 29th, 2022:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  Events and Upcoming Events

Performance of Principle Indexes: 

^{As of 2022/04/29 – Source: www.marketwatch.com}

^{As of 2022/04/29 – Source: www.marketwatch.com}

Last week’s and next week’s key economic events:

US economy (S&P 500 -2.73%):

• The major indexes endured a fourth consecutive week of losses, as growth fears were compounded by some disappointing earnings results from Amazon.com, which has a heavy weighting in many prominent indexes.
• The S&P 500 Index moved further into correction territory, down roughly 14% from its recent peak, while the technology-heavy Nasdaq Composite and small-cap Russell 2000 Index fell further into bear markets, down roughly 24% from their highs.
• Energy stocks outperformed the S&P 500 after Russia announced that it was cutting off natural gas exports to Poland and Bulgaria.
• The geopolitical and macroeconomic concerns that have loomed large over sentiment in recent weeks remained in place. Major earnings reports from Microsoft and Google’s parent company Alphabet largely offset each other.
• A similar dynamic appeared to be set up for Friday trading, following conflicting earnings reports from two other mega-cap companies, Amazon and Apple. Amazon shares plunged 14% after the company surprised investors with its first quarterly loss since 2015, due in part to weaker online sales. Apple stock originally rose on the news that it recorded record revenue in the previous quarter, but cautious guidance for the current quarter because of supply chain problems seemed to drain the gains later in the session.
• The week’s economic data offered ammunition for both those predicting “stagflation” or easing price pressures in the months ahead. The biggest data surprise may have been the Commerce Department’s advance estimate showing that the economy contracted at an annualized rate of 1.4% in the first quarter, well below consensus expectations of a roughly 1.0% expansion.
• Other economic reports also indicated continued expansion. Core capital goods orders rose 1.0% in March, double consensus expectations, while personal spending rose 1.1%, beating expectations for an increase of 0.7%.
• Some inflation data were arguably encouraging. The year-over-year increase in the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, eased to 5.2% in March, its first deceleration in over a year.

Canadian markets (S&P/TSX -3.16%):

• Weak results from Amazon soured sentiment as North American stock markets fell to wrap up a dismal April with Canada’s main index posting its fifth consecutive month of declines.
• The S&P/TSX composite index closed down 359.06 points or 1.7 per cent to 20,762.00. It lost two per cent for the week and 5.4 per cent in April.
• All 11 major sectors on the TSX were lower, with nine losing at least one per cent.
• Canadian real GDP for Feb accelerated (1.1% versus 0.8% expected, from0.2%), or 4.5% y/y. StatsCan’s December flash estimate pegs GDP growth at 0.3%
• The Canadian dollar traded for 78.17 cents US compared with 77.95 cents US on Thursday.

Performance 2021: S&P 500/400/600 Sectors

European and Asian economies:

• Shares in Europe pulled back on concerns about slowing economic growth, high inflation, and tightening monetary policy. Encouraging quarterly earnings reports may have helped to moderate these losses.
• European Commission Executive Vice President Valdis Dombrovskis told UK newspaper The Times that Brussels is working on a sixth package of sanctions against Russia. These actions could include some form of oil embargo or other mechanism that would target Russia’s oil revenue while seeking to minimize the potential “collateral damage” to the European Union (EU), which relies heavily on energy imports from the country.
• Meanwhile, Russian state energy company Gazprom stopped gas supplies to Bulgaria and Poland for failing to pay in rubles, as decreed by a new law.
• The eurozone economy expanded 0.2% sequentially in the first quarter, as surging commodity prices and disruptions related to Russia’s invasion of Ukraine weighed on the pace of growth.
• With an eye toward quelling inflation, Sweden’s central bank unexpectedly raised interest rates for the first time since 2019 and announced that it would slow the pace of its asset purchases in the back half of the year.
• Emmanuel Macron won a second term as president of France, defeating Marine Le Pen, leader of the far-right National Rally party.
• Stocks in Japan fell over the week. The Bank of Japan (BoJ) remained dovish at its April monetary policy meeting, leaving interest rates unchanged at their near-zero levels and maintaining the scale of its asset purchases.
• The BoJ raised its outlook for inflation, forecasting that the consumer price index (CPI) will rise by a median 1.9% on the previous year in the 2022 fiscal year compared with the 1.1% increase it predicted in January of this year.
• The central bank revised down its forecasts for economic growth over the same period from 3.8% year on year to 2.9%. Factors cited included the resurgence of the coronavirus, rising commodity prices, and a slowdown in overseas economies.
• Prime Minister Fumio Kishida’s government announced new measures—amounting to around JPY 6.2 trillion (USD 48.5 billion)—to cushion the impact of soaring prices on companies and consumers and support the economy’s still-fragile recovery from the coronavirus pandemic.
• On the economic data front, industrial production in March showed signs of upward movement.
• The unemployment rate edged down in March, as the lifting of coronavirus restrictions contributed to tighter labor market conditions.
• Chinese markets ended on a mixed note amid reports that the country’s Politburo pledged to boost economic stimulus and called for the “healthy development” of the technology sector.
• The 25-member Politburo is the Chinese Communist Party’s top decision-making body, chaired by China’s President Xi Jinping.
• News from the Politburo meeting also contained few new details about how China will support the economy but was consistent with recent reports focused on infrastructure, tax cuts, and consumption support.
• Concerns about the steep cost of China’s zero-tolerance policy regarding the coronavirus continued as the government stepped up containment measures and rolled out mass testing in Beijing and Hangzhou.
• Shanghai’s monthlong lockdown continued to reverberate as many foreign residents have fled and factories struggled to reopen, though officials have started to allow people to leave their homes in a growing number of residential areas.

What to watch this week:

• US Fed policy announcement
• Canada trade data
• Canadian, US, and Eurozone employment data
• UK, Australia, and Brazil monetary policy announcements
• Eurozone and Japan consumer confidence data
• OPEC+ meeting
• Global Purchasing Manager Indices
• 161 S&P 500 and 84 S&P/TSX companies report earnings

Sources: Bloomberg.com,Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org

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