Markets Up on Earnings

For the week ending 25 April 2025

As of midday Friday, global equities were higher on the week as corporate earnings were strong and tariffs tensions eased. The yield on the 10-year US Treasury note fell approximately 5 basis points from last Friday to 4.28% while the price of a barrel of West Texas Intermediate crude oil declined $2.13 to $62.55. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), fell back to 27 on Thursday from 30 late last week.

MACRO NEWS

Trump says he won't fire Powell

On Tuesday, US President Donald Trump said he had “no intention of firing” US Federal Reserve Chair Jerome Powell. This came after comments Trump made in Truth Social posts that implied he would seek to fire the Fed chair. Markets declined in response to the posts but rallied after Trump’s comments on Tuesday. Despite backing off his stance on Powell, Trump remained critical of the central bank’s slow pace of interest rate cuts, stating that he wanted to see Powell be “more active in terms of his idea to lower interest rates.” Powell’s term as Fed chair expires in May 2026.

Durable goods orders surge in March

US durable goods orders jumped 9.2% in March, well ahead of expectations of 2% Transportation equipment rose 27% led by commercial aircraft bookings, which increased 139%, contributing to the increase over the month. The strength in transportation masked weakness elsewhere as core capital goods orders, which include non-defense capital goods orders excluding aircraft, increased just 0.1% in March. The weakness outside of aircraft orders indicates businesses are showing caution as uncertainty around tariffs and tax policy persists.

US home sales fall most in two years

US sales of existing homes declined by 5.9% in March to a seasonally adjusted annual rate of 4.02 million, the largest decline since November 2022. The pace was also the slowest pace of sales since March 2009. Inventory has been increasing faster than demand as sellers who have been waiting for rates to fall have begun to list. Home prices remain near record highs, with mortgage rates over 6.5%. This may result in a continued slow pace of sales after an already weak 2023 and 2024. Recent economic uncertainty may also be a factor in the slowdown as large purchases are often postponed over economic concerns.

QUICK HITS

Preliminary purchasing managers’ indices for April decreased in the eurozone, United Kingdom and in the US as services readings were weaker despite a pickup in manufacturing.

US consumer sentiment fell to 52.2 in April from 57 in March, one of the lowest readings historically, indicating consumer fears over the economy due to tariffs. Additionally, consumer inflation expectations increased to 4.4% over the next 5-10 years with expectations for a 6.5% jump in prices over the next year, the highest reading since 1981.

 China is considering suspending 125% tariffs on some US imports including medical equipment and industrial chemicals. There have also been discussions on waiving tariffs for plane leases. These exemptions come after the US excluded electronics from its 145% tariff on Chinese imports earlier, a further de-escalation of the trade war between the two countries as the economic costs of tariffs weigh on certain industries.

US initial jobless claims were up 6k from the week prior but remain near recent levels. Continuing claims declined to 1.84 million for the week of April 12 from 1.88 million the week prior. Claims continue to be in a narrow range indicating a large uptick in layoffs has yet to occur. 

EARNINGS NEWS

With about 31% of the constituents of the S&P 500 Index having reported for Q1 2025, blended earnings per share (which combines reported data with estimates for those that have yet to report) show that earnings rose around 8.02% compared with the same quarter a year ago and down from more than 18% in Q4 2024, according to data from FactSet. Blended sales rose 4.4% year over year.

THE WEEK AHEAD        

Tuesday: US Consumer Confidence, US Case-Shiller Home Price Index, JOLTS, Australia CPI

Wednesday: US GDP, US Vehicle Sales, US Employment Cost Index, US PCE, Eurozone GDP, BoJ Policy Rate

Thursday: US Jobless Claims, Japan Unemployment

Friday: US Unemployment, Eurozone Unemployment, Eurozone CPI

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Past performance is no guarantee of future results.

Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.