Daily market snapshot

• Stocks finish higher: U.S. equity markets traded higher on Wednesday, following a sharp gain on Tuesday that saw the S&P 500 rise by 2.5%.* The catalyst behind today's move was comments from President Donald Trump yesterday evening suggesting that he has no intention of removing Fed Chair Jerome Powell prior to the end of his term in 2026, helping to ease investor concerns over Fed independence. Additionally, reports have surfaced that suggest U.S. tariffs on China could move meaningfully lower, providing an additional boost to market sentiment on Wednesday. From a leadership perspective, growth sectors of the S&P 500, such as technology and consumer discretionary, outperformed, while defensive sectors such as consumer staples, along with the commodity-sensitive energy sector, were among the laggards. Overseas, markets in Asia were mostly higher overnight, while European equity markets closed higher as well. On the economic front, preliminary April S&P Global PMI data suggested that the U.S. economy continued to expand in April, but at a slower pace than the prior month.* Bond yields finished the day slightly lower with the 10-year U.S. Treasury yield closing around 4.38%.*
   
• Preliminary PMI data points to moderating activity in the U.S. and abroad: Global growth trends are in focus today with the release of the preliminary April S&P Global Purchasing Manager Index (PMI). The PMI is a diffusion index where a reading above 50 signals that activity is expanding relative to the prior month, while a reading below 50 signals that activity is contracting. The U.S. composite PMI for April registered at 51.2, down from the prior month's reading of 53.5 and signaling that economic activity continued to expand in April, but at a slower pace than the prior month.* Activity in Europe appears to have stagnated in April, with the eurozone composite PMI registering at 50.1, below the prior month's reading of 50.9 and the lowest reading since December of last year.* The future output sub-index for the eurozone composite PMI, which is a measure of business expectations for the level of output over the coming year, declined to 54.3, the lowest reading since 2022 and signaling that trade-policy uncertainty in the U.S. is weighing on business confidence abroad.* In our view, current U.S. tariff policy will likely lead to slower growth both in the U.S. and abroad over the coming months and quarters. However, negotiations are ongoing, and recent reports suggest that a de-escalation in trade tension with China could be on the horizon. Trade deals that lead to lower tariff rates over the coming months could provide support to both global economic activity and equity markets. 
   
• Corporate earnings in focus: Corporate earnings are in the spotlight this week, with roughly 20% of companies in the S&P 500 reporting first-quarter results. Tesla was the first member of the Magnificent 7 to report this earnings season, with profits and sales both lower than expectations.* However, Tesla maintained guidance for the launch of new products, such as its lower-cost vehicle and the Cybercab, which provided support to the stock on Wednesday.* Next up for the Magnificent 7 companies will be Alphabet, which is scheduled to report after the market close tomorrow.* At an index level, S&P 500 earnings are expected to grow by roughly 7% in the first quarter, lower than expectations of over 11% at the beginning of the year but representing healthy growth nonetheless.* At a sector level, information technology and health care are expected to see the strongest earnings growth for the first quarter, while commodity-sensitive sectors, such as energy and materials, are expected to see the lowest growth rates.* For the full-year, S&P 500 earnings are expected to grow by 9.6%.* In our view, earnings growth of roughly 10% in 2025 could prove overly optimistic, as tariffs could potentially have a negative impact on corporate profit margins. However, we expect corporate profit growth to remain positive in 2025. The 90-day pause on the April 2 tariff announcement could provide an opportunity for de-escalation and negotiation, which could lead to lower effective tariff rates over time. Corporate earnings could also find support if the tariff backdrop stabilizes and the U.S. administration turns its focus to more pro-growth policies, such as tax reform and deregulation later this year.

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet
Magnificent 7 represented by Apple, Alphabet, Amazon, Meta, Microsoft, NVIDIA and Tesla.}

• Stocks close sharply higher – Equity markets rose on Tuesday, with financial and consumer discretionary stocks posting the largest gains, indicating a risk-on tone. Bond yields were down, with the 10-year Treasury yield at 4.40%. In international markets, Asia was mixed, while Europe closed higher, as European Central Bank President Christine Lagarde commented that disinflation for the region is nearing completion*. The U.S. dollar advanced against major international currencies. In commodity markets, WTI oil traded higher, as the U.S. issued new sanctions on crude from Iran*.
   
• Markets to turn attention to earnings releases of Magnificent 7 constituents this week – Tesla is set to report first-quarter earnings after market close today, with Alphabet to follow on Thursday. Though still early in the earnings season, with 16% of the S&P 500 companies reporting quarterly results, performance has been strong, as 76% have beaten analyst estimates, with an average upside surprise of 6.2%.* While forecasts for first-quarter earnings growth of S&P 500 companies have been revised lower to 6.9%, performance is expected to be broad, with seven of the 11 sectors forecast to report higher earnings year-over-year*. The sectors expected to experience earnings contraction represent about 14% of the market capitalization of the S&P 500.* Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view. In addition, earnings growth is expected to accelerate over the quarters ahead to 9.6% for 2025,* which should provide solid fundamentals to support stock prices over time, in our view.
   
• Preliminary services and manufacturing indexes to be released Wednesday: The S&P Flash U.S. Services PMI is forecast to edge lower to 52.5 for April, down from 54.4 the prior month*. Services PMI has remained above the key 50.0 mark that reflects expansion for more than two years straight.* Flash manufacturing PMI is expected to fall to 48.7, from 50.2 in March*. Overall, if the readings are close to these forecasts, they would be consistent with recent trends of services showing expansion, which should more than offset the modest contraction in manufacturing, in our view, as it represents a larger portion of the U.S. economy. Continued, though likely slower, economic growth would be supportive of the healthy labor market and consumer spending, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet

Monday, 04/21/2025 p.m.

• Stocks close sharply lower as Fed independence concerns add to tariff risks – Equity markets fell on Monday, as President Trump continued his criticism of Federal Reserve Chair Jay Powell and called for interest rates to be cut. Powell, whose term is scheduled to end in March 2026, does not directly control interest rates but does have influence as the chair and is one of 12 voting members of the Federal Open Market Committee (FOMC), which is responsible for setting the fed funds rate. Any move to remove Chair Powell would likely drive investor confidence lower, in our view, as it could bring into question the Fed's long-standing independence from political influence. Markets are also awaiting any updates on U.S. trade negotiations that are reportedly in progress*. In international markets, Asia was mostly higher, as China's central bank held interest rates steady, as expected*. Most markets in Europe were closed in observance of the Easter Monday holiday*. The U.S. dollar extended its decline against major international currencies. In commodity markets, WTI oil is trading lower as U.S.-Iran talks continue, which could boost supply if sanctions are loosened, while slowing economic growth could reduce demand*.
   
• Bond yields modestly higher – Bond yields rose, with the 10-year Treasury yield at 4.41%*. Bond markets are pricing in three or four interest-rate cuts by the Federal Reserve, likely starting in June.** The Fed's own projection for the fed funds rate – known as the "dot plot" – points to two rate cuts this year, which would put the policy rate in the 3.75% - 4.0% range***. We expect the 10-year Treasury to remain primarily in the 4.0% - 4.5% range this year, as we laid out in our 2025 Outlook. In our view, a positive yield curve should keep intermediate-term Treasury yields above the fed funds rate, which we see heading toward the 3.5% - 4.0% range. The Fed has ended its balance-sheet reduction program – known as "quantitative tightening" – allowing the central bank to participate more actively in Treasury bond auctions, likely helping support bond prices and keeping yields contained to the upside. Persistent government budget deficits and uncertainty relating to inflation could prevent yields from falling much further.
   
• Leading economic index falls but doesn't point to recession – The Conference Board's Leading Economic Index (LEI), which is intended to provide an early indication of significant turning points in the business cycle and where the economy is heading in the near term, fell 0.7% in March to 100.5, below estimates for a 0.5% decline.* Weaker consumer expectations for business conditions and the recent drop in the S&P 500 were the largest drivers of the drop. Higher weekly hours worked for manufacturing and the building permits for housing were the main positive contributors. Importantly, LEI's six-month change, while still negative, does not signal recession risk****. These readings indicate that growth is slowing amid tariff risks and policy uncertainty but do not point to a recession. Pro-growth policies, such as deregulation and tax cuts, should help support the economy later this year, in our view.

Brian Therien, CFA
Investment Strategy

Source: *FactSet **CME FedWatch ***U.S. Federal Reserve ****The Conference Board

• Stocks finish mixed – Equity markets were mixed on Thursday, with the S&P 500 and Russell 2000 small-cap index posting modest gains, while the Nasdaq and Dow closed lower. From a leadership perspective, most sectors of the S&P 500 closed higher, led by the energy and consumer staples sectors, while health care and technology were among the laggards. Overseas, markets in Asia traded higher overnight, while European markets were slightly lower following the European Central Bank's decision to lower its policy rate by 0.25% to 2.25% at today's meeting.* Earnings remain in focus, with shares of UnitedHealth Group under pressure today after the company reported first-quarter earnings per share that were lower than expected and also provided lower-than-expected earnings guidance for 2025.* The decline in shares of UnitedHealth weighed on the performance of the Dow, with the index closing lower by roughly 1.3%.* On the economic front, initial jobless claims were lower than expected for last week, while housing starts for March were modestly below expectations.* Bond yields ticked slightly higher, with the 10-year Treasury yield closing around 4.33%.*
   
• Jobless claims tick lower – Initial jobless claims for last week were lower than expected, falling to 215,000 from 224,000 in the prior week.* Despite concerns in recent months about layoffs, jobless claims remain well below the 30-year median of 324,000, signaling that layoffs up to this point have been limited.* In addition to low levels of layoffs, job growth has been steady in 2025, with nonfarm payrolls rising by 228,000 in March and averaging 152,000 thus far in 2025. While modestly below the average monthly pace of job gains in 2024 of 168,000, average monthly nonfarm-payroll growth of 152,000 still represents healthy job growth, in our opinion. While labor-market conditions could ease over the coming months as businesses adjust to the new policy backdrop and potentially slowing economic growth, we'd reiterate that the labor market and economy are entering this period of uncertainty from a strong starting point. While downside risks to the economy have certainly risen, a strong starting point could provide support to the U.S. economy.
   
• Diversification showing its merit in 2025 – After two consecutive years of outsized returns in U.S. large-cap stocks, international equities have outperformed thus far in 2025, rewarding investors with well-diversified portfolios. International developed large-cap stocks, which include stocks from regions such as Europe and Japan, have been among the top performers, higher by over 6% through yesterday's close, while the S&P 500 is lower by roughly 10%.* Fiscal support out of Germany has provided a boost to sentiment in the region, while a weaker U.S. dollar has supported returns as well.* Emerging-market stocks have also outperformed U.S. equities, and are down only 1% in 2025 through yesterday's close.* In our view, it's too early to call the recent outperformance in international equities the start of a prolonged period of international outperformance versus the U.S., and we believe that opportunities remain attractive in U.S. stocks over a one- to three-year time horizon. However, it does reiterate the value of maintaining a well-diversified portfolio. Incorporating allocations to a variety of asset classes can help smooth periods of volatility and help investors benefit from periods of rotating leadership.

Brock Weimer, CFA
Associate Analyst

Source: *FactSet

^{International developed large-cap stocks represented by MSCI EAFE Index. Total return in USD.
Emerging-market stocks represented by MSCI EM Index. Total return in USD.}

Wednesday, 04/16/2025 p.m.

• Stocks fall on tech weakness – U.S. equity markets closed sharply lower on Wednesday, driven by weakness in the technology sector and hawkish-leaning commentary from the Fed. Semiconductor manufacturer NVIDIA announced that it will take a charge of up to $5.5 billion as a result of the U.S. government's decision to impose license requirements for exports to China on its chips.* In response, shares of NVIDIA declined by more than 6%.* Additionally, Federal Reserve Chair Jerome Powell provided an economic outlook speech this afternoon, highlighting that the tariffs announced by the U.S. administration have been much larger than anticipated and will likely lead to slower economic growth and higher price levels in the near term. Chair Powell also reiterated that the Fed will need to ensure that secondary effects of tariffs don't translate into persistently higher inflation, and acknowledged that Fed policy is well-positioned to wait to act until there is more clarity on the policy front. The hawkish-leaning commentary from Fed Chair Powell, along with export restrictions on NVIDIA chips, led to a risk-off move in markets, with the S&P 500 declining by 2.2%, while the tech-heavy Nasdaq declined by 3.1%.* Overseas, Asian markets were mostly lower overnight, despite a stronger-than-expected first-quarter GDP reading out of China, while European markets traded lower as well. On the economic front, retail sales for March were slightly above expectations, while industrial production was in line with consensus. Bond yields traded lower on Wednesday, with the 10-year Treasury yield declining to 4.28%.*
   
• All eyes on the consumer – Consumer-spending trends are in focus today, with retail-sales data for March slightly above expectations. Headline retail sales rose by 1.4% in March, above expectations for a gain of 1.3% and above the February reading of 0.2%.* The higher-than-expected retail sales number was driven by a surge in spending on motor vehicles and parts, which rose by 5.3% in March, perhaps driven by consumers looking to front-run auto tariffs. However, control-group retail sales, which excludes spending on more volatile categories such as gasoline, motor vehicles and building materials, rose by a healthy 0.4%, signaling broad-based strength in spending.* Until March, consumer spending had shown signs of fatigue in the first months of 2025, after growing at an above-trend pace for most of the past two years.* Last Friday's University of Michigan Consumer Sentiment Survey showed that sentiment fell to its lowest since June 2022 in April, as the uncertain policy backdrop has weighed on sentiment.* While consumer spending could soften over the coming months, labor-market conditions and household balance sheets remain healthy, which should prevent any slowdown in spending from turning into a prolonged contraction, in our view.
   
• Earnings season underway – First-quarter earnings are underway, with several large U.S. banks, such as J.P. Morgan, Goldman Sachs, Morgan Stanley and Citibank, having reported earnings thus far. Overall, results have been broadly positive, with strong trading revenue helping the banks exceed analyst expectations. For the quarter, analysts expect S&P 500 earnings per share to grow by 7%, with the technology and health care sectors expected to see the strongest earnings growth.* For the full year, analyst estimates are calling for roughly 10% earnings growth for the S&P 500 in 2025.* In our view, current estimates of 10% earnings growth could prove overly optimistic, as tariffs could potentially have a negative impact on corporate profit margins. However, we still expect earnings growth to remain positive in 2025. The 90-day pause on the April 2 tariff announcement could provide an opportunity for de-escalation and negotiation, which could lead to lower effective tariff rates over time. Corporate earnings could also find support if the tariff backdrop stabilizes and the U.S. administration turns its focus to more pro-growth policies, such as tax reform and deregulation later this year.

Brock Weimer, CFA
Associate Analyst

Source: *FactSet