Equity Markets Saw Gains Last Week

Wall Street enjoyed another solid week of gains on the heels of some strong corporate earnings data, a better-than-expected jobs report, and more signs that the White House and China may be open to trade talks. By the close of trading last Friday, the Dow had posted 10 straight sessions of gains, while the S&P 500 enjoyed nine consecutive sessions. Investors have seen signs that the economy is resilient in the face of tariffs, despite the fact that the GDP contracted in the first quarter. Tech shares have played a large part in driving the market higher. Information technology rose about 6.0% last week to lead gains for nearly all of the market sectors, with the exception of energy, which was flat. Crude oil prices declined for the second straight week on fears of sluggish Chinese demand, rising U.S. production and concerns that OPEC+ will boost supply. The dollar ticked higher for the second week in a row, while bond markets seemed to have responded to concerns that trade policies could still slow the economy, putting pressure on the Federal Reserve to cut interest rates.

First-Quarter GDP Declined on Increased Imports

The first, or advance, estimate of first-quarter gross domestic product showed economic growth declined 0.3%, the first negative quarter since the first quarter of 2022 and below the consensus of up 0.2%. The decline in GDP was largely attributable to a significant increase in imports, which are a negative in the calculation of GDP, likely due to the anticipation of higher tariffs increasing the cost of imports. Personal consumption expenditures rose 1.8% in the first quarter (4.0% in the fourth quarter), making a lower-than-usual 1.21% contribution to GDP. Government consumption expenditures and gross investment fell 1.4% in the first quarter, likely impacted by cuts in payrolls, services and other expenditures.

Eye on the Week Ahead

The Federal Open Market Committee meets this week. It is not likely that a rate cut will result from the May meeting, although the consensus is that interest rates will be reduced at least two times before the end of the year.