Market Pulse

In focus

Equity markets took a breather following three- straight weeks of gains as investors digested signs of a slowing economy. Two releases in the first part of the week showed fewer job openings in March than many expected, and Friday’s nonfarm payrolls report supported the narrative of a slowing labor market, which has remained resilient so far. Evidence of this resilience includes the unemployment rate ticking back down to 3.5%, causing yields to rise on Friday after declining for much of the week.

Investors will get a sense of how companies are navigating the economic environment this week with the beginning of first quarter earnings season. While earnings estimates for the S&P 500 have come down in recent weeks, it remains to be seen whether these estimates are fully considering the impact of a slowing economy on profitability. Fittingly, the first wave of results will come from banks after a troubling quarter featuring two bank failures. The Federal Reserve (Fed) will keep a close eye on the strength of the banking sector as it weighs an additional rate hike.

In addition to earnings, policymakers will focus on two key inflation readings this week, the Consumer Price Index (CPI) and Producer Price Index (PPI). On the heels of softening economic data, markets will hope that price pressures continued to ease in March. 

A look back

• Global equities were mostly unchanged last week, though international developed markets gained modestly.
• Treasury yields fell across much of the curve and the 2-year yield closed the week just below 4%. The 2-/10-year inversion deepened for the second straight week.
• Nonfarm payrolls were roughly in line with consensus estimates. Additionally, fewer than expected job openings provided multiple signals of a cooling labor market. 

A look ahead

• Inflation data will take center stage, with both CPI and PPI set to be released. Later in the week, retail sales will provide another barometer of economic strength.
• Earnings season unofficially kicks off this week with several banks releasing results from the first quarter, which saw significant stress in the industry.
• Economic releases: CPI, FOMC minutes, PPI, Retail Sales, Industrial Production, University of Michigan Consumer Sentiment

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