April 25, 2025

Worldwide Headlines

1. Tariff talk remains front-and-center. This week, the word of the week was “de-escalation.” This started on Tuesday with respect to what Treasury Secretary Bessent said about the US/China trade standoff which then was furthered by President Trump saying he had no intention of firing Fed Chair Powell. Stocks took this news very positively, with all five of the major global indexes we track higher this week.
2. U.S. Dollar Index is now in-focus. Last week, the U.S. Dollar Index closed below a key 100 level for the first time since 2022. This week, that same U.S. Dollar Index is trying to make it back to that 100 level; so far, without success. The lower Dollar Index is a potential sign that investment dollars are moving out of the U.S. We will continue to monitor this.
3. Treasury yield curve steepens. At the beginning of April, the difference in yield between a 2-year Treasury and 10-year Treasury was 0.32%. As of this writing, it is 0.50%. The steepening of the yield curve may be a sign of inflation and/or federal debt concerns. It is something that our Fixed Income Team anticipated and will continue to be monitored.
4. S&P 500 earnings come in ahead of expectations. With 179 S&P 500 companies reporting first quarter earnings, the tally, so far, is 73% and is ahead of the Wall Street expectation with year-over-year earnings per share growth at +9.7% versus the estimated +6.6% for the index at the beginning of the earnings period. This is considered good news.
5. International Monetary Fund (IMF) cut its global GDP growth expectations. The IMF cut its global real GDP growth estimate from +3.3% to +2.8% for this year, citing the unknown on global trade due to the U.S. tariffs. The U.S. is now forecast to grow +1.8% this year and +1.7% in 2026, a cut of 0.9% and 0.4% respectively from their January projections.

Economic Reports

1. The leading Economic Index from March was lower by 0.7% from the prior month and considered worse than expected. Inside the report, 5 of the 10 components were negative. This was led by large declines in ISM New Orders and Average Consumer Expectations.
2. S&P Global U.S. Composite Purchasing Manager Index preliminary for April had a reading of 51.2, which was slightly lower than expected. The Manufacturing reading was better than expected at 50.7, but the Services component was only 51.4. Overall, it is good to see Manufacturing back over the key 50 level.
3. New Home Sales from March was at a higher than expected rate of 724,000 annualized due to a surge in the South region. The median sale price fell 7.5% to $403,600, mostly reflecting greater sales activity at lower price points. This could also reflect the fact that builders are also sitting on a growing pile of unsold inventory. The supply of new homes for sale at any stage of construction in March edged up to 503,000, still the highest since 2007. The number of completed homes awaiting purchase ticked up as well, remaining at levels which were last seen in 2009.
4. Fed Beige Book noted “Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines.”
5. Durable Goods Orders preliminary from March Durable Goods orders jumped by 9.2% in March, well above the consensus of 2.0%. Orders for ex-transportation were unchanged, below consensus at 0.3%. This surge in headline orders was almost entirely due to a 190% leap in the volatile aircraft orders component to its second-highest level on record.
6. Weekly Initial Jobless Claims rose slightly from the prior month to 222,000 with Continuing Claims below expectation at 1.841 million.
7. Existing Home Sales from March fell to an annualized rate of 4.02 million, the lowest since last Fall, when a 4.13 million annualized rate was expected. The median sales price increased 2.7% from a year ago to $403,700, a record for the month of March and extending a run of year-over-year price gains dating back to mid-2023. It is interesting that prices are still rising even as more inventories come onto the market. The supply of previously owned homes jumped 19.8% from a year ago to 1.33 million, the highest for any March since 2020.

Markets this Week (mid-day Friday)

1. U.S. Dollar Index is higher. DXY at 99.31, recently setting a new 52-low last week, it is now +0.18% so far this week (1 yr. range = 98.278 to 109.956).
2. Bond yields are lower. 2-year Treasury yields are down to 3.75%; 10-year declines to 4.25%.
3. Stocks are mixed. All five of the major global stock indexes we track are higher on the week in the 2-4% range.
4. Commodities considered mixed. 4 of 6 sectors in BCOM Index are higher; only Precious Metals and Energy are lower.

Next Week

1. Economic Reports
   • o S&P CaseShiller 20-City Home Price Index, JOLTS Job Opening Survey, Consumer Confidence, Advance Q1 GDP, Personal Income/Spending, Pending Homes Sales Index, ISM Manufacturing, Monthly Vehicle Sales, Monthly Employment Report, Factory Orders
     • U.S. consensus QoQ real GDP est.: Q1 = +0.5%, Q2 = +0.9%, Q3 = +0.7%, Q4 = +1.4%
     • U.S. consensus YoY inflation est.: Q1 = +2.7%, Q2 = +2.8%, Q3 = +3.4%, Q4 = +3.5%
2. Earnings Reports (Q1 earnings season begins 4/11)
   • Q1-2025 S&P 500 EPS estimate at the beginning of the period = +6.6%
   • Q1-2025 S&P 500 summary to date: 179 reported; 73% beat estimate; YoY EPS = +9.7%
   • S&P 500 YoY EPS estimates: Q1-2025 = +9.6%, Q2-2025 = +4.5%, Q3-2025 = +8.5%, Q4-2025 = +8.3%
3. Events
   • Central bank meeting in Chile, Hungary, Colombia, Thailand, Japan
   • Busiest week of Q1 earnings season featuring the large U.S. tech companies