Michael Reinking:
Hello, I'm Michael Reinking, Senior Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week, we are here to keep you up to date on the key trends and events driving global markets. So let's dive into this week's Market Storylines. Now, we are recording on Thursday, the first trading session of May. April was in the books with the S&P 500 ending the month down a little less than 1%. So as you can tell, it was a pretty quiet month. Not. Actually, it was one of the more volatile months on record. Following the unveiling of the tariff table in the Rose Garden, the S&P 500 was down around 14% at the lows, just five trading sessions into the month, and briefly traded down over 20% from its peak. However, that turned out to be the shortest bear market in history lasting all of about 30 minutes.
A week later, the 90-day tariff reprieve triggered one of the sharpest single-day rallies on record. For the remainder of the month, the market was in a period of recalibration and repair as the tone about trade negotiations softened and the earnings season began with results coming in better than feared. Now, the month was capped off with a seven-day winning streak with the index ending about 15% off of the lows. Now, this type of volatility is historic in nature. Since 1970, there have been 11 months where the S&P 500 fell over 13% during the month and ended over 13% above that level. The last time was at the start of COVID. Prior to that, 2018 during the China trade war and Trump 1.0, and then you'd need to go back to the great financial crisis in 2008 where it happened for three consecutive months. No wonder many traders still suffer from PTSD. Now, this was the first time the index sniffed ending the month unchanged, with every other instance down at least 7.5% with an average monthly loss of 11.6%.
Now, it has been a very busy week full of trade headlines, key economic data, and it is the peak of earnings season with nearly 40% of companies in the S&P 500 reporting. As mentioned above, US markets are on a seven-day winning streak, which as of midday looks like it could stretch to eight. There continues to be some positive news flow as it relates to trade. Now, after the close on Friday, The Wall Street Journal reported that the administration has a framework for trade negotiations, which will start with 18 major trade partners, and the administration later this week announced an easing of auto tariffs, removing the stacking of tariffs, and negotiations seem to be moving in the right direction, with Commerce Secretary Lutnick suggesting that the first trade deal was done.
Now, earnings this week have been mixed in a similar fashion to what we saw last week. The Q1 numbers have been pretty solid outside of consumer-facing companies. However, commentary from Visa and Mastercard continues to suggest that consumer spending trends have remained resilient outside of some weakness in travel. Now tech has continued to be a positive upside standout with both Microsoft and Meta trading sharply higher today after reporting last night. Now Microsoft highlighted strong growth in cloud and continued momentum in AI adoption and Meta also beat estimates with sanguine comments about ad markets, outside of some China-related slowdown. Now, the company also increased its CapEx budget, which is helping the entire AI infrastructure complex. Now, Apple and Amazon are out after the close today.
Now, there also has been some major economic data. Yesterday, Q1 GDP contracted by 0.3%, the first negative reading since 2022. Now, the negative print provided some good clickbait, but it is a bit sensationalized. This wasn't completely surprising after the trade deficit hit a record high at over $160 billion earlier in the week, driven by a pull forward of demand ahead of tariffs. Now imports have a negative impact on GDP and with imports, this impacted GDP by about five percentage points. This was somewhat offset by the build in inventories, which added back two and a quarter percent. Now, the consumption numbers within the report did moderate to 1.8% from an inflated 4% in Q4, but this was ahead of street estimates. Now, equities initially sold off on the report, but the response was related to the prices, which came in well ahead of estimates of 3.7% in the quarter, pointing to a stagflationary backdrop, which would make it difficult for the Fed to move. Now, I believe investors understand this underlying dynamics within the report, but unfortunately, the data will remain sloppy until at least Q2.
Now, markets improved yesterday after the March PCE report came in much better than expected, easing some of those inflation concerns. Now, the biggest piece of economic data is still ahead of us with the BLS employment report on Friday. Now, quickly summarizing this week's labor market data to date. Now, yesterday's ADP report came in light with a decline in hiring in education and health services, while there wasn't much of a bounce in travel and leisure. Now, these two categories have netted only 4,000 jobs after averaging 86,000 throughout 2024, and have been a big driver of NFP job gains. Now, earlier in the week, the JOLTS jobs openings fell from the previous month, but layoffs and discharges remained at very low levels, and today's initial claims jumped over 240,000, while continuing claims moved over 1.9 million. But this was impacted by a big jump in New York State related to the timing of spring break, so it doesn't seem like it's a signal about a change in labor market conditions.
Now, tomorrow, analysts are looking for about 130,000 jobs to be added to the economy, while the unemployment rate is expected to hold steady at 4.2%. Now, looking ahead to next week, it will remain very busy on the earnings front. Economic data will quiet down a bit, with ISM Services the main highlight in the US, and China data will also be closely watched. There are a bunch of central bank rate decisions, including the FOMC on Wednesday, which is widely expected to remain on hold. Once again, thank you for spending some time with us today. Remember, you can always watch on tv.nyse.com or our YouTube channel, or listen on the Inside the ICE House podcast feed. I'm Michael Reinking. Talk to you again next week. Party on Wayne, party on Garth.
Speaker 2:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X, @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week, Inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.