Weekly Update 05/02/2025: US April Employment Report Comes in Stronger than Expected as Earnings Season Rolls On
- IBM will invest $150 billion in the US; they announce a dividend increase for the 30th year in a row
- Coca Cola, Pfizer, UPS, Linde, Stryker, Amgen, T. Rowe Price, DuPont, Ventas all release earnings beating profit expectations
- Carrier releases earnings beating profit & revenue expectations while raising 2025 guidance
- Apple releases earnings beating profit & revenue expectations; they raise dividend 4% and announce a new $100 billion share buyback
- Sysco misses numbers but raises dividend
- ADP releases earnings beating profit and revenue expectations while raising 2025 guidance
- Revvity releases earnings beating profit & revenue expectations while raising 2025 guidance
- Visa releases earnings solid profit and revenue beat while affirming guidance; they announce new $30 billion share buyback authorization
- Microsoft releases earnings blowing past profit & revenue expectations; stock rises as they beat on virtually every metric
Domestic Economic News
Wall Street traders looked past weak economic data and Corporate America’s warnings in early week trading to push stocks higher this week as bond yields fell on speculation the Federal Reserve will cut interest rates to prevent a recession. US equities behaved better this week helped by strong earnings from SGK core holding Microsoft and also Meta after both companies released earnings after the market close Wednesday. There was also relief over signs the Trump administration is stepping back from its harshest tariff threats. The White House said it was nearing an announcement of a first tranche of trade deals with partners that would reduce planned tariffs. Sentiment was also helped by a report that the US has been proactively reaching out to China through various channels. China late Thursday evening confirmed this and indicated they were evaluating next steps. We watched the Asian futures rise sharply Thursday evening on that news.
US job growth was robust in April and the unemployment rate held steady, suggesting uncertainty over President Donald Trump’s trade policy has yet to have a material impact on hiring plans. This was a much better report than economists were expecting. Nonfarm payrolls increased 177,000 last month after the prior two months’ advances were revised lower, according to Bureau of Labor Statistics data out Friday. The unemployment rate was unchanged at 4.2%. The report suggests the labor market continues to cool gradually, a sign that businesses facing heightened uncertainty around tariffs and turmoil in financial markets didn’t significantly alter their hiring plans. Most economists anticipate the brunt of the impact from punishing levies will be seen in coming months. “This is a good jobs report all around. The ‘R’ word that the labor market is demonstrating in this report is resilience, certainly not recession,” Olu Sonola, head of US economic research at Fitch Ratings, said in a note. “For now, we should curb our enthusiasm going forward given the backdrop of trade policies that will likely be a drag on the economy.” US stocks opened higher and Treasury yields rose following the release, while the dollar remained lower. Investors also pared expectations for Federal Reserve interest-rate cuts in 2025.
In economic data this week, home-price gains in the US eased in February as more properties came up for sale. A national gauge of prices climbed 3.9% from a year earlier, according to data from S&P CoreLogic Case-Shiller. That was less than the 4.1% annual increase in January. Buyers are starting to find more properties on the market after years of an intense inventory crunch. The total supply of homes for sale rose in February and hit the highest level in five years in March, according to Redfin Corp. With mortgage rates falling through February, buyers also got a slight reprieve from the high costs, helping boost sales of previously owned homes. But in March, transactions dropped by the most since 2022. The uncertainty around tariffs and the economy have pushed up borrowing costs and caused buyers to pull back. That’s spurred some housing experts and economists to cut their outlook for home-price growth this year. “Buyer demand has certainly cooled compared to the frenzied pace of prior years, but limited housing supply continues to underpin prices in most markets,” said Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices. “Rather than broad declines, we are seeing a slower, more sustainable pace of price growth.”
US consumer spending jumped in March while a key measure of inflation decelerated, a welcome reprieve before tariffs are expected to broadly drive up prices. Inflation-adjusted consumer spending climbed 0.7% last month, according to Bureau of Economic Analysis data out Wednesday. That was the most since the start of 2023 and suggested households spent aggressively to get ahead of new tariffs. Meantime, the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures price index — stagnated from a month earlier for the first time in nearly a year. Excluding food and energy, the so-called core PCE was also unchanged, the tamest in almost five years. The combination of slowing inflation and healthy spending suggest the economy was in a good place before the brunt of President Donald Trump’s tariffs took effect. Economists widely expect the trade policies to reinvigorate price pressures and in turn discourage spending. Another support for the economy last month was the strongest advance in real disposable income in more than a year. That helped bolster spending, particularly for motor vehicles and other durable goods, which climbed by the most since early 2023. Spending on services rebounded, especially for dining out. Wednesday’s report offered some relief on the inflation front. A measure of goods inflation that excludes food and energy fell for the first time this year. Core services prices — a closely watched category that excludes housing and energy — were little changed, also the tamest since 2020. While economists generally expect companies to pass some of the extra costs from tariffs on to consumers, some retailers have indicated they will be forced to absorb part of the hit as consumers show signs of fatigue after years of lingering inflation. The saving rate dropped to 3.9%, backing off after a big jump at the start of the year, according to the PCE report. Nominal wages and salaries advanced 0.5%. Economists have paid close attention to developments within the labor market, as steady wage growth has supported resilient consumer spending in recent years.
GDP shrank in the first quarter on extensive front-loading ahead of tariffs. That’s quickly reversing now that more tariffs have taken effect. Final sales to domestic purchases — which exclude trade and inventories — fared better, but that demand was also pulled forward, leaving less room for growth ahead. The underlying pace of expansion will likely be tepid ahead, as higher prices from tariffs weigh on spending and trade-policy uncertainty discourages investment. Amplifying the negative policy shock is the Fed’s reluctance to cut rates, as policymakers remain on guard against persistent inflation. Real GDP contracted 0.3% in 1Q (vs. +2.4% prior). The reading was below consensus expectations of -0.2% and Bloomberg Economics estimate of -0.1%. The trade deficit widened sharply on a surge in goods imports, taking away 4.83 percentage points from top-line GDP growth. That resulted in a buildup of inventories, which added 2.25 ppts to growth. Final sales to domestic purchasers, or GDP excluding international trade and inventories — typically less volatile than the headline figure — expanded 2.3%. That was significantly above top-line GDP, but down from 3.0% in 4Q24. Consumer spending cooled but still surprised to the upside at 1.8%, vs. 4.0% prior (consensus expected 1.2%). The slowdown reflected some unusual seasonal factors, including harsh weather that tempered activity at the start of the quarter. Otherwise, consumers have been front-running some purchases in anticipation of tariff-driven price hikes but have grown more cautious about spending on services, which decelerated to 2.4% (vs. 3.0% prior). Bottom line: The economy contracted in 1Q on a record surge in imports as businesses and consumers front-loaded purchases ahead of tariffs. Any demand that was pulled forward to start the year will dent growth ahead — which means greater downside risk for the second half of 2025.
US consumer confidence fell in April to an almost five-year low on growing pessimism about prospects for the economy and labor market due to tariffs. The Conference Board’s gauge of confidence decreased nearly 8 points to 86, the weakest since May 2020, data released Tuesday showed. It marked the fifth straight monthly decline, the longest such stretch since 2008. The median estimate in a Bloomberg survey of economists called for a reading of 88. A measure of consumer expectations for the next six months plunged to the lowest level since 2011, while a gauge of present conditions also fell. The Conference Board’s data are consistent with the University of Michigan’s survey and illustrate growing consumer apprehension that higher duties on foreign goods will damage the economy and job market, while pushing up prices. Corporate executives have signaled concerns that the recent plunge in confidence will filter through into weaker demand, while warning that consumers can expect to see higher prices because of tariffs. The measure of inflation expectations itself rose to the highest since November 2022, according to The Conference Board’s report. The share expecting higher interest rates in the year ahead also rose. The share of consumers saying jobs were currently hard to get increased to 16.6%, the highest since October. A smaller share said jobs were plentiful. The difference between these two — a metric closely followed by economists to gauge the job market — decreased to the lowest since September. “The three expectation components — business conditions, employment prospects, and future income — all deteriorated sharply, reflecting pervasive pessimism about the future,” Stephanie Guichard, senior economist at The Conference Board, said in a statement. While sentiment figures, along with other so-called “soft data” that include surveys of businesses, have been downbeat, the weakness has yet to translate into a notable pullback in consumer spending. Retail sales in March posted the biggest gain in more than two years, inflation broadly cooled, hiring picked up.
US job openings fell last month to the lowest since September, indicating weaker labor demand amid increased economic uncertainty. Available positions decreased to 7.19 million from a revised 7.48 million reading in February, according to monthly Bureau of Labor Statistics data published Tuesday. The figure was near levels last seen in 2020 and below all estimates in a Bloomberg survey of economists. The data indicate that demand for workers is weakening as employers put spending plans on hold until they have better clarity on President Donald Trump’s policies. The administration continues to press forward with widespread tariffs, which many economists contend will slow growth and raise the odds of a recession. However, other parts of the report were more encouraging. The number of layoffs fell to the lowest since June, and hiring was steady. The so-called quits rate, which measures the percentage of people voluntarily leaving their jobs each month, ticked up to the highest since July. So far, Trump’s efforts to slash the federal government have had the most discernible effect on the labor market. Job-cut announcements tripled in March from a year ago, largely due to actions of the Department of Government Efficiency, according to outplacement firm Challenger, Gray & Christmas.
A widely followed measure of Texas manufacturing activity weakened significantly as executives used words like “chaos” and “insanity” to describe the turmoil spurred by President Donald Trump’s tariffs, according to a report by the Federal Reserve Bank of Dallas. A general gauge of business activity plunged to its worst reading since May 2020 based on recent survey responses from 87 Texas manufacturers, the Dallas Fed said Monday. While responses indicated modest current growth in production, company outlooks fell to a post-pandemic low as respondents pointed to frazzled supply lines and difficulty in forecasting. Survey indexes tracking the prices of raw materials and finished goods came in well above average, and almost 60% of respondents said higher tariffs would negatively impact their business this year. Even as a majority of companies said they would pass higher costs onto customers, some 38% said it’s becoming harder or much harder to do so. US prices have increased more than 20% in the past four years, increasing concern that consumers may be fatigued, or have less spending power, to tolerate another ramp up in inflation. “The tariff issue is a mess, and we are now starting to see vendors passing along increases, which we will have to in turn pass along to our customers,” a respondent in the printing industry told the Dallas Fed. Another in food manufacturing said “tariffs and tariff uncertainty are wreaking havoc on our supply lines and capital spending plans.” An executive in electronics manufacturing said, “We have already had to turn around and refuse shipments because customers cannot afford the tariffs, delaying our ability to build, which will eventually lead to job losses.” Even companies with domestic inputs felt pressure because of a reduction in demand, one survey respondent said. Texas accounts for about 10% of total US manufacturing. One executive in the solidly Republican state told the Dallas Fed that “we believe the direction the current administration is leading our country is on target, but the pain to get there may be longer and more intense than originally anticipated.”
Applications for US unemployment benefits jumped to the highest level since February during the week that followed Easter. Initial claims increased by 18,000 to 241,000 in the week ended April 26, according to Labor Department data released Thursday. The median forecast in a Bloomberg survey of economists called for 223,000 applications. Before adjusting for seasonal factors, initial claims increased about 12,900 last week. Applications in New York alone rose more than 15,500 — coinciding with spring recess in parts of the state. New applications tend to be choppy from week to week, especially around holidays such as Easter and spring breaks. Up until now, claims had remained subdued in the face of uncertainty about the economic outlook. Any sustained increase in claims would suggest a weakening in what is currently seen as a resilient job market. Continuing claims, a proxy for the number of people receiving benefits, rose to 1.92 million in the week ended April 19, the highest since 2021 and a sign that it is taking longer for out-of-work people to find a job. The figure exceeded all estimates. The four-week moving average of new applications, a metric that helps smooth out fluctuations from week-to-week, rose to 226,000. The number of job cuts announced by US-based employers dropped to about 105,400 in April as plans to shed federal workers subsided, outplacement firm Challenger, Gray & Christmas said in a report. After some 280,000 firings linked to the actions of the Department of Government Efficiency were announced in March, last month’s tally included only about DOGE- related 2,700 job-cut plans. “Though the government cuts are front and center, we saw job cuts across sectors last month,” Andrew Challenger, senior vice president at the firm, said in the report. “Generally, companies are citing the economy and new technology.” Challenger tracks announced layoffs, and it remains unclear how many of them will ultimately result in actual job losses. Applications filed by out-of-work federal employees aren’t included in total jobless claims. Data from the previous week showed claims are hovering near levels seen in January, before the Trump administration started firing workers across agencies. The figures for Fed employees will be updated later on Thursday. In ADP Research data published Wednesday, hiring by US firms moderated to the slowest pace in nine months, and some services sectors including education and information shed workers.
Interest Rate Insight and the Fed
Federal Reserve Chair Jerome Powell has repeatedly characterized the labor market as being in “solid” condition and officials are expected to hold interest rates steady at their policy meeting next week. Powell recently said it’s necessary to get inflation under control to ensure maximum employment — a key condition as policymakers and many other economists widely expect tariffs to stoke price pressures, which is contributing to recession fears. In the JOLTS report the number of vacancies per unemployed worker, a ratio Fed officials watch closely as a proxy of the balance between labor demand and supply, dropped to 1.0, the lowest since September. At its peak in 2022, the ratio was 2 to 1. Some economists have questioned the validity of the JOLTS data, in part due to the survey’s low response rate and heavy revisions. A similar index by job-posting site Indeed, which is reported on a daily basis, showed openings declined in March. As mentioned, separate data Tuesday also showed weakening in the economy. US consumer confidence fell in April for a fifth month, the longest stretch of declines since 2008. Also, the US merchandise-trade deficit unexpectedly widened in March to a record as companies continued importing goods to get ahead of tariffs, prompting some economists to downgrade their GDP forecasts.
Impactful International News
While the news regarding sentiment has been overwhelmingly bad as we have written about regarding tariffs – it will be interesting to see the framework for a negotiated trade deal with a country like India, It seems this may be one of the first countries where significant progress has been made. We would argue – tariffs and trade barriers are bad and if they come down globally that would be good. Hard to put it more simply than that – having majored in economics in undergrad and studied econ at Wharton. So this is an interesting perspective – and here is a highlight from a very recent report out of India itself:
Apr 22, 2025 — India's average tariff rate is 17 percent, compared with 3.3 percent by the US, as per a report by the Indian Council for Research on International Economic Relations (ICRIER). “The most striking difference is in the agriculture sector, where India's tariffs are notably higher,” ICRIER said in the February report.
Also the following is interesting – if we can see through the next quarter or two – any reduction in trade barriers would benefit SGK core holding Walmart as India is a huge potential market opportunity. Additionally, long term a reduction in India’s trade barriers would benefit the consumer in India as well.
Current Indian regulations restrict US e-commerce firms to operating solely as online marketplaces for third-party sellers. In contrast, domestic competitors can manufacture, own and sell products through their platforms. India restricts foreign e-commerce companies like Amazon and Walmart from holding inventories and directly selling goods on their platforms. They are allowed to operate as marketplaces connecting buyers and sellers. Additionally, restrictions prevent these companies from engaging in exclusive selling agreements with sellers or offering steep discounts based on such agreements. Here's a more detailed breakdown:
Foreign e-commerce companies are primarily allowed to operate as marketplaces, facilitating transactions between sellers and buyers.
They are not permitted to hold inventories of goods and directly sell them on their platforms.
E-commerce firms cannot form exclusive selling arrangements with sellers or offer significant discounts based on those deals.
E-commerce companies must ensure that their related parties or associated enterprises are not listed as sellers on their platforms, and no related entity should sell goods to online sellers on the same platform.
Foreign direct investment (FDI) is primarily allowed in e-commerce companies that provide marketplaces for buyers and sellers.
The euro-area economy grew more than expected at the start of the year, though is yet to feel the full force of US President Donald Trump’s tariffs. First-quarter gross domestic product jumped 0.4% from the previous three months — double the previous period’s gain — Eurostat said Wednesday. Analysts in a Bloomberg survey had estimated a 0.2% increase. The outcome means the 20-nation bloc has boosted output for five consecutive quarters, with its biggest two members, Germany and France, both returning to growth. Looking ahead, however, business surveys suggest a weakening — mainly due to confidence-sapping uncertainty over the US’s intentions, compounded by the actual impact of the tariffs themselves. European Central Bank Chief Economist Philip Lane said last week that trade tensions are unlikely to result in a recession for the currency bloc, but acknowledged that expansion would be lower than previously hoped. He and his colleagues are weighing further interest-rate cuts after a seventh reduction in mid-April, with some expecting Trump’s levies to inflict lasting damage on the economy. Most remain confident inflation will sustainably return to the 2% target this year. Germany and France saw GDP rise by 0.2% and 0.1% in the first quarter — in line with expectations. Italy saw a bigger-than-anticipated increase of 0.3%. There were upbeat numbers across the euro zone this week: Estimates for Spain, the Netherlands, Belgium, Austria and Finland put GDP between 0.1% and 0.6% higher. Ireland’s reading — distorted by its role as a tax base for US multinationals — jumped 3.2%.
Company Events
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