Stock markets fell for a fifth straight week –U.S. stocks suffered steep losses again on Friday to close out a brutal month. The Nasdaq had its worst month since 2008 as the technology stock sell-off continued. The Nasdaq is now in bear territory, down more than 20% for the year. The Dow and S&P 500 did not fare much better this week with the Dow plunging 939 points on Friday. The S&P had its worst month since March 2020 when the pandemic shutdown was enacted. Higher interest rates, higher fuel costs, supply shortages, and higher employment costs have investors feeling that earnings, while strong in the first quarter, will be lower in the future.
The Dow Jones Industrial Average closed the week at 32,977.21, down 2.5% from 33,811.40 last week. Its down 9.25% year-to-date.
The S&P 500 closed the week at 4,131.93, down 3.3%from 4,271.78 last week. The S&P is down 13.3% year-to-date.
The NASDAQ closed the week at 12,334.64, down 3.8% from 12,839.29 last week. It is down 21.2%, year-to-date.
U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 2.89%, unchanged from 2.90% last week. The 30-year treasury bond yield ended the week at 2.96%, unchanged from 2.95% last week. We watch bond yields because mortgage rates often follow treasury bond yields.
Mortgage rates – Home mortgage rates have continued to increase. Freddie Mac Primary Mortgage Survey reported that mortgage rates as of April 28, 2022, for the most popular loan products were as follows:
The 30-year fixed mortgage rate was 5.10%, unchanged from 5.11% last week.
The 15-year fixed was 4.40% almost unchanged from 4.38% last week.
The 5-year ARM was 3.78%, almost unchanged from 3.75% last week.
Initial Jobless Claims
Initial Jobless Claims were down -5k to 180k for the week ending April 23rd vs. the prior week's revised print at 185k (orig. 184k). The 4-week moving average on headline is now sitting at 179.75k vs. the prior week's average of 177.5k. Continuing claims, which lag a week, fell -1k to 1.408mln from 1.409mln. This is now the lowest reading for continuing claims since February 1970.
According to the advance estimate from the BEA, GDP for Q1 declined by an annual rate of -1.4% vs. the expected rise of 1.1% and vs. the Q4 2021 print of 6.9%. Within the Q1 2022 estimate, personal consumption expenditures contributed 1.83 percentage points, and while that's a pretty ordinary quarter by historical standards, it was the largest since last Q2. Fixed investment contributed 1.27 pp, with 1.17 pp of that from nonresidential factors. The change in private inventories accounted for -0.84 pp, and government consumption expenditures/investment accounted for -0.48 pp, a touch weaker than Q4's -0.46 and the largest negative contribution since Q4 2013. The one piece of this quarter's report that really stood out was a huge negative contribution from net exports, which subtracted -3.20 pp from headline growth, broken down into -0.68 from exports and -2.53 from imports. Given the record-breaking trade deficits we've seen of late, including the huge jump in the preliminary goods trade deficit released yesterday, this wasn't too much of a surprise. Overall, while the headline missed expectations, there was a high probability that we would see a miss for Q1, especially given the surge of Covid-19 cases in January and Russia's invasion of Ukraine, and expectations of Fed tightening this year.
Durable Goods Orders
Durable Goods Orders for March came in a bit under expectations at 0.8% MoM, missing market expectations of 1%. Shipments have increased by 1.1%, with March at 1.2%, while February was at 0.1%. Inventories increased by 0.1%, with March at 0.7%, with February at 0.6%. Unfilled orders dropped by 0.1% with March at 0.4% and February at 0.5%.
New Home Sales
New Home Sales for the month of March were at 763k, which is a slight miss of market expectations of 768k. MoM, new home sales were down 8.6%, a big miss from -0.6% the market was expecting, but that was due to February being revised up from 772k to 835k. Inventory saw a nice increase, from 392k to 407k, the largest pickup since August 2008. The increase in inventory did not help with affordability, as the median was up 3.6% MoM, and up 21.4% YoY. Sales slid in all four regions, though the drop in the South accounted for a large majority of the fall, from 461k to 414k. They dropped from 215k to 202k in the West, from 103k to 94k in the Midwest, and from 56k to 53k in the Northeast.