Treasury prices rose over the course of the week on economic news and lower inflation expectations. On Wednesday, the German Ifo Business Climate Index fell 0.5 points, drawing concerns about the German economy and increasing the appetite for U.S. Treasuries. Australian consumer prices were also flat on Wednesday, increasing the likelihood the Reserve Bank of Australia would cut rates on May 7. However, concerns of an economic downturn were eased on Thursday’s strong durable good orders and Friday’s 1st quarter annualized GDP number of 3.2%, which exceeded analyst expectations of 2.3%. Inflation also was lower than expected on Friday, which caused yields to drop as investors saw that as a sign that the Fed would be more capable of cutting rates in 2019. On Monday, the Trump administration announced it would end waivers for countries buying oil from Iran, causing oil prices to rise. However, oil ended the week lower with a large drop on Friday after President Donald Trump told OPEC to bring down prices, which he could threaten with extended sanction waivers or selling more from the U.S. strategic reserve.
Several key U.S. equity indices closed with all-time highs last week as corporate earnings and economic announcements were strong. The S&P 500 Index closed at an all-time high Friday eclipsing the previous all-time high set on 9/20/2018. The NASDAQ Composite Index also closed at an all-time high passing its previous high set on 8/29/2018. Pegging-out the highlights of last week’s rally starts with stronger than expected 1Q GDP of 3.2% compared to expectations of 2.3%. The strength in GDP helped to fuel the U.S. Dollar, as the greenback reached its highest levels since May 2017. Further, earnings season was off to a very good start after, according to Bloomberg, 80% of the 210 names in the S&P 500 that have announced quarterly results have topped estimates. Facebook Inc. beat earnings estimates by nearly 17%, after announcing ad revenue growth of 31%, amid 32% impression growth, which fueled the stock to a 7% gain last week. Microsoft Corp. briefly saw its market cap hit $1t during intraday trading on Thursday after reporting cloud revenue was up 22% year-over-year, the software giant returned over 5% last week. Twitter Inc. shares soared nearly 16% after announcing record earnings fueled by revenue growth of 20% and average daily users of 134m or 11% year-over year growth. Not every stock had positive results. 3m Co. sunk over 13%, the worst daily return in 32 years, after management revealed slowing conditions in key end markets, which is fueling a restructuring effort to drive productivity and reduce costs.
Charles and Brian
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