WEEK OF APRIL 17TH

24 Apr WEEK OF APRIL 17TH

Market Indexes:

Stock indexes ended the week with fractional gains on Friday, as market participants got their first taste of Q1 earnings results from big tech companies like NFLX and TSLA. Despite quite a bit of volatility in those two names, markets remained within tight trading ranges as investors assessed how reported economic data might influence interest rates as we look ahead to a massive week of corporate earnings. Next week, the earnings results continue with GOOG, META, and MSFT all reporting.

Monday:

Empire State Manufacturing Accelerates By +35.4 M/M. Quick Review From Last Week

• Big upside surprise in the Empire State Manufacturing Index for April, which increased +35.4 points M/M to +10.8 -> first positive print after four negative months and highest since July 2022
  • New orders were up 46.8 to +25.1 and Shipments were up 37.3 points to +23.9
  • Prices paid fell -8.9 points to +33

• That said, the employment and hours worked portion of the index fell for the third straight month and hit the lowest level since 2016 (excluding peak pandemic)

• The April NAHB Housing Index accelerated slightly to 45, from 44 in March as housing largely remains in the doldrums remaining down ~-30% Y/Y

Tuesday:

Redbook Weekly Retail Sales New Cycle Low +1.1% Y/Y. Housing Starts and Permits Slow M/M

• U.S. Redbook Weekly Retail Sales hit another cycle low today at +1.1% Y/Y, this is down from +1.5% last week

• For context, Redbook Weekly Retail Sales started the year at ~10% Y/Y!

• March U.S. Housing Starts came in at 1.4MM, versus a downwardly revised February print of 1.43MM -> down -17% Y/Y
• March U.S. Building Permits accelerated at a quicker pace to 1.4MM, versus 1.55M in February -> down -25% Y/Y and -9% M/M

• As of yet, not much in the way of a recovery, or bounce, in U.S. housing data
• The derivative impact from today’s data is that U.S. housing inventory will continue to stay low on an absolute basis . . .

Thursday:

The Demand Side of Housing Remains In A Recession. Continuing Jobless Now Up +45% From Lows

• Yesterday’s MBA Weekly Mortgage Applications were down -8.8% W/W and -36% Y/Y -> the demand side of housing remains in a recession
• We saw this demand issue in the Existing Home Sales for March, which declined -2.4% M/M to 4.44MM (SAAR) -> also down -22% Y/Y

• Within this report, the median home price was also down -0.9% Y/Y to $375K.

• Offsetting the continued weakness in housing demand, due to higher mortgage rates, is the overall inventory of homes for sale in the U.S., which remains near all-time lows at 980K

• Unlike the NY Fed data this week, which was an upside surprise, the Philly Fed Index decelerated to -31.3 for April

• For context, this survey is now at the lowest level, setting aside the pandemic, since the GFC in 2008

• U.S. Weekly Jobless Claims ticked up to 245K, versus 240K in the prior week

• Within this report Continuing Claims also increased to 1.865MM and are now up some ~45% from their trough in September 2022

Earnings Reports:

LMT: Lockheed Martin beat on both top and bottom as they reaffirmed their guidance for 2023. LMT returned $1.3 billion of cash to shareholders through dividends and share repurchases. They secured a contract for the first United States sea-based hypersonic missile program and was selected to provide 88 F-35 fifth-generation fighter aircraft to Canada. LMT currently pays a 2.49% annual dividend.

T: AT&T’s first quarter earnings were in line with expectations, partially offsetting slight disappointment in revenues, with management still reasonably optimistic about its current year guidance. The stock fell after the company reported underwhelming subscriber and revenue numbers. Despite the miss on subscriber growth, AT&T’s stock continues to trade below its historical average at just about 9x estimated free cash flows. AT&T currently pays a 6.09% annual dividend.