4/25/25: Markets Show Optimism on Trade Hopes and Economic Data
Apr 25, 2025 | Weekly Highlights
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The tone of the markets has improved in the latter half of April in hopes that US trade policy will moderate as negotiations with trading partner’s progress. Rates fell and corporations resumed bond issuance as credit spreads tightened on heavy investor demand. There was a large amount of economic data for market participants to consider this week as well. The S&P Global US Manufacturing Purchasing Managers Index (PMI) improved slightly to 50.7 in April, remaining in expansion territory. Tariffs, labor costs and a weaker dollar contributed to higher prices of inputs for manufacturers. Meanwhile, the S&P Global US Services PMI tumbled 3 points from the previous month to 51.4 on weaker demand for service exports such as travel and tourism. Durable Goods Orders surged 9.2% month-over-month for March on large orders for commercial aircraft but were flat on an ex-transportation basis. The housing market continued to be buoyed by demand for new construction as New Home Sales rose 7.4% month-over-month in March to 724,000 units annualized. Builders offered incentives to lure buyers as the supply of new homes for sale increased to 503,000, the highest level since 2007. Existing home sales, which comprise the bulk of the housing market, fell by -5.9% in March to 4.02 million units annualized. Affordability continued to weigh on potential home buyers, with prices still elevated and the average 30-year fixed rate mortgage sitting at about 6.8% as of April 24, according to Freddie Mac. The Leading Index (LEI) slumped -0.7% in March versus the prior month and was down -3.5% year-over-year. Another forward-looking indicator, the Chicago Fed National Activity Index, was nearly flat at -0.03 in March versus +0.24 in February The yield curve shifted lower as the 2-year US Treasury note dropped about 5 basis points to 3.76%, the 5-year fell 6 basis points to 3.89% and the 10-year declined 8 basis points to 4.26% as of this writing. The federal funds futures market is pricing in 3-4 quarter point cuts in 2025, while the Chandler team anticipates fewer rate decreases this year as the Fed balances concerns over inflation and slower growth. |
Next week: Dallas Fed Manufacturing Activity Index, Wholesale Inventories, S&P Corelogic Case Shiller 20-City Index, JOLTS Job Openings, Conference Board Consumer Confidence, MBA Mortgage Applications, ADP Employment Change, 1st Quarter GDP, Personal Consumption Expenditures (PCE), Employment Cost Index, MNI Chicago PMI.
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