Stocks ended April on a sharp selloff Friday with major indices substantially down for the week.  The Nasdaq 100 index had the biggest loss and the worst month since 2008.  The Ukraine war and a mixed bag of large tech company earnings weighed on the markets.  Corn and soybeans prices neared a record.  Energy prices rose on Russia cutting off Poland and Bulgaria from natural gas as they had not paid in Rubles.  Germany is moving towards cutting off Russian oil.

It was a busy week for economic data as gross domestic product, employment costs, durable goods order and new home sales were all released.  1^st quarter gross domestic product contracted following sharp gains since the middle of 2020, largely due to companies adding less to inventories.  Consumer spending remained strong.  Most economists are predicting growth to resume in the 2^nd quarter.

The Bank of Japan met and bucked the trend of most countries by doubling its bond purchases and maintaining short-term interest rates at -0.1%.  The bank cited the recent sharp spike in energy prices as a temporary driver of inflation and claimed it still needed to stimulate the economy to achieve 2% inflation over the long run.

Treasury yields rose with the 30-year bond yield at 2.997% and the 10-Year note at 2.922%.  30-year mortgages rose to 5.5%.   U.S. crude oil rose to $104.51 a barrel and natural gas rose to $7.394 per MMBTUs.  The U.S. dollar index rose to 101.15 and gold fell to $1896.90 an ounce.

In the economic numbers:

• The  S&P CoreLogic Case-Shiller National Home Price Index has risen 19.8% over the past year in February up from a 19.1% gain in January.
• The Eurozone economy rose at a 0.8% annual rate in the first quarter. 
• Inflation in the Eurozone hit 7.5% year over year in April, up from 7.4%.
• The Commerce Department reported:
  • Durable goods orders rose 0.8% in March following a 1.7% drop in February.
    • Autos and electronics led the gains.
    • Nondefense capital goods excluding aircraft rose 1.0%.
    • Excluding defense, durable goods orders rose 1.2%.
  • Sales of  new homes fell 8.6% in March to a four month low.  
    • Low inventories and higher mortgage rates were attributed to the decline.
  • U.S. gross domestic product contracted at a 1.4% annual rate in the first quarter.  This was down sharply from the 6.9% annual growth rate in the 4^th quarter.  The decline was attributed to:
    • Imports growing faster than exports.
    • Slower inventory increases following a rapid rebuilding of inventories last year.
    • A sharp decline in government stimulus spending.
    • Inflation and higher interest rates reducing consumer’s buying power.
    • Consumer and business spending grew in the first quarter but inventory and trade spending declined.

• • Personal consumption expenditures rose 1.1% in March with travel, dining gasoline and food driving the gain while vehicle spending fell.
  • Personal income rose 0.5%.
  • The personal consumption price index, the FED’s preferred measure of inflation rose 0.9%.  Excluding volatile food and energy, the PCE index rose 0.3%.
• The Labor Department reported:
  • Employment costs rose 4.5% in the first quarter from the prior year’s 1^st quarter, the fastest growth in records starting in 2001.
    • From the 4^th quarter, costs rose 1.4%.
  • First time claims for unemployment fell to 180,000, up from a revised 185,000 in the prior week. 
  • The 4-week moving average of claims, designed to smooth out volatility, rose to 179,250.
  • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude was unchanged at 11.9MM BPD.
  • Natural gas storage rose 40BN cubic feet and is below the 5-year average at this time of year.

• Baker Hughes reported the number of active oil rigs rose 3 to 552.  The number of active natural gas rigs was unchanged at 144.
• Factset reported with 55% of S&P 500 companies reporting earnings, the weighted average earnings growth rate was 7.1%. 

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Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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 These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.