April 2016 Market Update

By Eli Sallman on May 6, 2016

The Markets (as of market close April 29, 2016)

Despite a poor close to the month, the indexes listed here improved in April (with the exception of the Nasdaq) compared to their March closing values--but not by much. The Dow gained a scant 88.55 points over the month, while the S&P 500 increased less than 0.3%. On the year, only the Russell 2000 and the Nasdaq remain below their year-end values.

 

Bond yields increased by the close of trading for April as prices fell, presumably due to investor money moving back to equities. The price of gold (COMEX) increased by month's end, selling at $1,294.90--about $62 higher than March's end-of-month price of $1,233.00.

The Month in Review

  • Employment: The labor market continued its strong run in March based on the latest information from the Bureau of Labor Statistics. Total nonfarm payroll employment rose by 215,000 in March, and the unemployment rate was little changed at 5.0%. Employment increased in retail trade, construction, and health care. Job losses occurred in manufacturing and mining. There were 8 million unemployed persons, while the labor force participation rate increased slightly to 63% from 62.9% in February, and is up 0.6% since September. The average workweek remained at 34.4 hours. Average hourly earnings for all employees on private nonfarm payrolls increased by $0.07 to $25.43, following a $0.02 decline in February. Over the year, average hourly earnings have risen by 2.3%.

 

  • FOMC/interest rates:Following its latest meeting in April, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 0.25% to 0.50%. With inflation running below the Committee's 2.0% target rate, the federal funds rate is expected to remain, for some time, below levels that are expected to prevail in the longer run, which leaves the timing of the next rate increase open to speculation.

 

  • Oil: Crude oil prices gained over the month, closing over $45 for the first time since February--this despite the inability of several major oil-producing countries to reach an agreement to cap production. At the end of April, crude oil (WTI) was selling at $45.92 per barrel, compared to the $37.49 per barrel closing price at the end of March.

 

  • International markets: Japan experienced a major earthquake on April 14, killing many and forcing the evacuation of thousands of Japanese. It is not certain what impact the devastating earthquake will have on Japan's major industries, but it's sure to affect manufacturing as well as imports and exports. Greece and its creditors continued negotiations over further austerity measures to be implemented by the country in exchange for additional loans and debt relief. The European Central Bank maintained its interest rates as the benchmark rate remained at 0%. The GDP in Great Britain fell to 0.4% in the first quarter, while China's GDP growth weakened to 6.7%. Sixteen major oil producers were unable to come to an agreement on reducing oil production, likely leading to continued weakness in crude oil prices.

 

  • Consumer sentiment: The Conference Board Consumer Confidence Index® for April fell to 94.2 from March's revised 96.1, driven by low expectations for future job availability. The University of Michigan's Index of Consumer Sentiment fell to 89 in April, compared with 91.0 in March as consumer expectations for an improving economy continue to wane.

 

Eye on the Month Ahead

The start of the second quarter saw the markets recover from their end-of-year regression. However, the economy as a whole hasn't picked up steam as noted by the FOMC following its April meeting. As we wind through May, all eyes will be on important economic indicators such as the GDP, residential housing, labor, and consumer spending in an attempt to determine the direction of the economy heading into the summer months.