Market Highlights

Economic

• March consumer confidence held flat at 104.8 from a revised February 104.7
• Retail sales rose 0.7% in March, with auto sales at 15.8 million units, above estimates
• Non-farm payrolls increased to 303,000, above estimates of 200,000
• Unemployment held steady at 3.8%, with underemployment rising to 7.2%
• U.S. industrial production rose 0.4% in March, after a 0.2% gain in February
• Housing prices rose 5.7%, as the supply of homes remains tight at 2.9 months
• New home construction numbers were 1.32 million in March, below estimates
• Existing home sales were down at 4.19 million in March, with mortgage rates still high
• U.S. manufacturing is flat, with March ISM at 50.3, beating estimates
• Personal income was up 0.3% and consumer spending was up 0.8% in February
• GDP was up 3.3% in the fourth quarter of 2023, with 1st quarter growth estimates at 2.9%

Inflation

• March core inflation rose 3.4% for CPI and 0.3% for PPI, above estimates
• Crude oil rose to $83, as war continues to spread in the Middle East
• Inflation remains sticky and above the Fed target of 2%

Monetary Policy

• The Fed held the Fed Funds rate at 5.25%-5.5% and the Discount Rate at 5.5%
• The Fed is expected to hold rates steady as inflation starts to rise again
• The Fed will remain data dependent, as more economists move to a soft landing scenario

International

• Iran attacked Israel with 300 missiles and 99% were knocked down by the Iron Dome System
• Israel countered with a precision attack right next to Iran's nuclear facilities, sending a message
• The Dollar and gold have strengthen as the Fed keep rates higher for longer
• Congress is working to get more aid for Ukraine and Israel as the wars drag on

Interest Rates

• Ten-year Treasury yields rose from 3.8% to 4.65%, and now stand at 4.6%
• Secure overnight finance rate SOFR, inter-bank lending standard, is 5.35%
• Mortgage rates rose from 6.5%, with the 30-year fixed at 7%
• Yields on international debt have remained positive, ending the free-money period

Earnings

• S&P 500 companies reporting with 74% beating on earnings and 58% on revenues
• Markets are forward-looking and are focused on 2024 earnings of $250 for the S&P 500
• 2024 earnings are projected to be up 8% from a year ago and 12% higher for 2025

Market Outlook

• In the first quarter of 2024, the S&P 500 was up 10.6% including dividends
• Market volatility has increased, with yields rising as the Fed may only cut two times - or not at all
• Communication services, Tech, and Energy were the best performing sectors
• The S&P 500 is trading at 21 times forward earnings, above its 25-year average

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