• Equity market volatility continues
• Treasury yields remain range bound
• Q2 earnings season commences next week

The volatility in the domestic equity markets continued and intensified last week primarily on talk, speculation, and ultimately uncertainty about tariffs and trade wars. As Don Draper of Mad Men fame quipped “our worst fears lie in anticipation.” Both the Dow Jones Industrial Average and the S&P 500 declined around 1%; NASDAQ 2% on the week. The NASDAQ which has led markets is now flat for the year; Both the Dow Jones Industrial Average and S&P 500 are off in the 3% range for the year. The weekly market action felt worse than it was because of the daily price swings.

The more defensive sectors once again had the best relative performance with Consumer Staples, Utilities, and Telecommunication advancing more or declining less than the other sectors. Technology shares turned in the worst performance for the week (down 2.18%). For the time being we expect equity market volatility to continue.

The yield on the 10-year Treasury investment remained under 2.8% for the week. The release of the March jobs report did little to solidify the direction of longer term rates as the underlying data points were mixed. Looking at the trend in the releases since January we conclude that the trend in jobs and wages continues to improve in a slow and steady fashion. Fed Chair Powell spoke during the course of the week and indicated that the Fed’s intention to raise short term rates at least two more times prior to year-end. The capital markets have currently priced in two rate hikes also but the probability of a second hike later in the year is waning.

Tuesday Mark Zuckerberg, Facebook CEO, testifies before Congress which may translate into more market volatility (at least for the technology stocks). Fortunately, Q2 S&P 500 earnings season gets underway next week with numerous money center banks and financial institutions reporting. Hopefully, the markets will take a break from the news flow and once again focus on fundamentals.

The economic calendar includes a release Tuesday on Producer Prices; inflation data for March is released Wednesday with expectations the level increases to 2.3%. Finally, the University of Michigan preliminary consumer sentiment index for April is reported on Friday.             

Next week is dominated by earnings reports by banks Friday:

Wednesday – Fastenal and Bed Bath & Beyond

Thursday – Rite Aid and BlackRock,

Friday – Citigroup, JP Morgan, Wells Fargo and PNC Financial Services

Indices for the week and YTD are as follows:

S & P 500 down 1.38% for the week; YTD index return is -2.59%

NASDAQ Composite down 2.10% for the week; YTD index return is +.17%

Dow Jones Industrial Average down .71% for the week; YTD index return is -3.18%

Benchmark 10-year Treasury bond yield stands at 2.78% - essentially flat for the week