Market Watch: April 28, 2023

For the four trading days covered in this report, the Dow gained 17 points to close at 33,826, the S&P 500 rose by 2 points to settle at 4,135, and the tech-heavy Nasdaq gained 70 points to close at 12,142. In Canada, the TSX fell by 171 points to end at 20,523.

Strategy

U.S. economic growth slowed in the first quarter while inflation accelerated

The U.S. economy grew at a 1.1% quarter-over-quarter annualized pace in 1Q23, lower than the media.n consensus estimate of 1.9% and the 4Q22 reading of 2.6%. Tepid business investment and a pullback in inventories were the primary detractors this quarter. Inventories, which can be volatile, detracted 2.3 percentage points from the headline figure. Last quarter, inventory change contributed 1.5 percentage points to growth. Conversely, consumer spending held up better, reflecting gains in both goods and services. Consumption rose by 3.7% this quarter, slightly lower than estimates of 4.0% but higher than 4Q’s figure of 1.0%. Overall, this category contributed 2.5 percentage points to the headline reading. Finally, the core personal consumption expenditure price gauge rose more than expected to 4.9% in the quarter, underscoring the persistence of inflation. Overall, the report indicates that the U.S. economy is starting to slow under the weight of high interest rates and inflation. Consumer spending was a major contributor to growth, but its resilience will rely on a strong labour market. If unemployment rises and companies begin to scale back their workforce, consumer spending could come under pressure in subsequent quarters.

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by Scotia Wealth Management - The Zukiwsky Group

Market Watch: April 28, 2023

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