Categories:
Key areas of focus
- This week brings a busy macro calendar, including February PCE, March CPI, ISM Services, FOMC minutes, and an updated read on consumer sentiment from the University of Michigan.
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Attention will also turn to the micro with the first quarter earnings season kicking off on Wednesday. Company results and guidance will provide a real-world read on how businesses are navigating rising oil prices from the Iran conflict. This week, Delta Air Lines will offer insight into both travel demand and energy dynamics given its direct exposure to fuel costs and their integrated refinery ownership.
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Sector performance has been volatile. Energy was the only positive performing sector in March. Last week saw a sharp reversal with broad gains across all sectors, while energy was the only sector in negative territory. Sector performance and investor sentiment can shift quickly, highlighting the importance of diversification to help manage volatility when leadership swings from one area of the market to another.
Week in review
Equities snapped a five-week losing streak last week, driven less by hard data and more by a softer tone in the headlines. Oil remained volatile, ending near where it began, with flows through the Strait of Hormuz still constrained. Early in the week, equities moved higher as yields declined following Powell’s “wait and see” messaging at Harvard. The rally continued into Tuesday despite mixed data, including fewer job openings and hiring falling to a six-year low, partially offset by stronger-than-expected consumer confidence. Momentum carried into Wednesday on renewed ceasefire hopes and better-than-expected data, including core retail sales, private sector employment, and an upside surprise in ISM Manufacturing. Thursday was more muted, with equities holding steady despite a spike in oil following Trump’s speech, while the trade deficit widened by less than expected. With the NYSE closed Friday, March payrolls were still released and surprised to the upside (+178k vs. 59k expected). Unemployment declined slightly. January numbers were revised up while February numbers were revised down leaving the combined two-month total slightly lower than previously reported.
Spotlight
Last week offered a timely check-in on the U.S. consumer, which remains the backbone of economic growth as consumer spending drives roughly two-thirds of GDP. We got insights into sentiment, spending, and employment. Consumer confidence surprised to the upside. However, expectations for the labor market and inflation remain a concern. Spending held up well, with retail sales rising more than expected and showing broad strength across most categories. Employment data remains mixed. Job openings declined and hiring fell to a six-year low, signaling softer demand. At the same time, March payrolls surprised to the upside. However, the decline in the unemployment rate was driven by a drop in participation rather than stronger hiring. Wage growth also came in below expectations. The broader labor market remains in a holding pattern where employers are hesitant to hire, but not yet cutting jobs. This creates a situation that is steady enough to support spending, but showing signs of underlying fatigue.
Markets
Sectors
Style & Market Cap
Sources
Harvard Magazine, Jerome Powell Talks Risk, Resilience, and AI at Harvard, retrieved from Harvard Magazine; https://www.harvardmagazine.com/university-news/fed-chair-jerome-powell-harvard
2. JOLTS Report
U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/jlt/
3. Consumer Confidence
The Conference Board, US Consumer Confidence, retrieved from The Conference Board; https://www.conference-board.org/topics/consumer-confidence/
4. Retail Sales
United States Census Bureau, Advance Monthly Sales for Retail and Food Services, retrieved from U.S. Census, https://www.census.gov/retail/sales.html
5. ADP Private Employment Report
ADP Research, ADP National Employment Report, retrieved from ADP, https://adpemploymentreport.com/
6. ISM Manufacturing
Institute for Supply Management, Institute for Supply Management (ISM) Purchasing Managers Index (PMI) Manufacturing Report, retrieved from ISM, https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/pmi/march/
7. Trade Balance
Bureau of Economic Analysis, International Trade in Goods and Services, retrieved from BEA, https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services
8. Jobs Report
U.S. Bureau of Labor Statistics, Employment Situation Summary, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/news.release/empsit.nr0.htm
Market Data
Morningstar Direct using Morningstar Indices
Authors:
Anthony Silva, CFA®
Senior Director of Strategy Management
World Investment Advisors, LLC