Stocks posted moderate gains last week, as the S&P 500 added 0.52%; the Dow increased 0.42%; and the NASDAQ rose 0.56%.[1] International stocks in the MSCI EAFE followed suit, gaining 0.41%.[2]

We received numerous new data updates last week, and most provided positive news for the economy. Retail sales, housing starts, and industrial production all beat expectations and increased in March.[3] 

Amid last week's primarily positive data updates, two key occurrences also affected markets:

1. Corporate earnings

2. Treasury yields

A Closer Look

1. Earnings Season Continued

As of April 20th, about 16% of S&P 500 companies shared their results for the first quarter, and over 80% of them beat earnings expectations.[4] However, this solid performance has yet to impress investors. While most companies have exceeded earnings projections, their stocks haven't reflected the growth.

On the other hand, companies that have beaten their sales projections, but missed on earnings-per-share, have dropped an average of 4.4% on their release days.[5]

Takeaway: So far, corporate earnings are on the rise, but any companies that don't beat estimates are experiencing considerable stock declines.[6]

2. Treasury Yields Rose

The yield on 10-year Treasuries hit 2.96%, the highest point since 2014. At the same time, the two-year yield climbed to its highest since 2008.[7] When interest rates rise, companies have higher borrowing costs, and bonds become a more enticing alternative to stocks.

Some investors are also concerned that the difference between the two Treasuries' yields is too close. This occurrence, known as a flattening yield curve, can imply that investors are not confident in the long-term economic outlook.[8]

Takeaway: Rising Treasury rates are worth watching. If they are a symptom of a growing economy, the markets should be able to handle them. However, if questions about economic growth accompany the increases, investors may worry.

What Is Ahead

We are now in earnings season's busiest week, when more than a third of S&P companies will release their reports.[9] Additionally, on Friday, April 27th, the initial estimate of the first quarter Gross Domestic Product will come out. [10]

All this information will help deepen our understanding of where the economy stands and what may lie ahead. If you have any questions about current data or future projections, we are available to talk.

ECONOMIC CALENDAR

  • Tuesday: New Home Sales, Consumer Confidence

  • Thursday: Durable Goods Orders, Jobless Claims

  • Friday: GDP, Employment Cost Index, Consumer Sentiment


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Gross Domestic Product (GDP) is a measure of output from U.S. factories and related consumption in the U.S.  It does not include products made by U.S. companies in foreign markets.

Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as one of the indicators of a company's profitability.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[2] www.msci.com/end-of-day-data-search

[3] www.ftportfolios.com/Commentary/EconomicResearch/2018/4/16/retail-sales-rose-0.6percent-in-march

www.ftportfolios.com/Commentary/EconomicResearch/2018/4/17/housing-starts-increased-1.9percent-in-march

www.ftportfolios.com/Commentary/EconomicResearch/2018/4/17/industrial-production-rose-0.5percent-in-march
[4] www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[5] www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21

[6] www.bloomberg.com/news/articles/2018-04-19/asian-stocks-set-to-slip-bond-sell-off-deepens-markets-wrap

[7] www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[8] www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21

[9] www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[10] www.barrons.com/mdc/public/page/9_3063-economicCalendar.html