Weekly Market Watch

Market Outlook

Last week, initial jobless claims came in at the highest level in nearly two years. Combined with the below-expectation jobs report from two weeks ago, it appears likely that labor markets are finally softening. Equity markets reacted with optimism, believing that to be evidence that a slower growth environment — without a recession — is possible. The “soft landing” market narrative was supported by the S&P 500^® reaching its highest level in a month and moving toward a new all-time high. Domestic mid-cap equities had their best weekly performance of the year, due to strong performance from the Industrials and Financials sectors.

The recent rally in domestic equities will be tested this week by the release of April’s inflation data. While current market expectations are undecided between one or two cuts from the Federal Reserve this year, should inflation come in above expectations, investors will likely interpret it as a confirmation of fewer expected rate cuts.

Chart of the Week

Last week, the first-quarter blended earnings growth rate improved, with contributions from all sectors except Industrials.

While overall growth has surpassed estimates by 2% for the quarter, non- “Magnificent 7” company estimates have remained negative.

Full-year 2024 growth estimates are now close to 11%, and fiscal year 2025 growth estimates inch closer to 14%. While consumer companies have reported modestly better results for the quarter, several have lowered guidance for the latter half of the year due to growing economic pressure.

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