Weekly Market Update – April 18, 2025

Quick Takes

• The VIX volatility index, or CBOE Volatility Index, was down considerably last week despite continued choppiness in the S&P 500 Index. In the end, the S&P 500 lost -1.5% for the week, while the technology-heavy Nasdaq Composite was down -2.6%. The small cap Russell 2000 bucked the trend, gaining +1.1%. Crude oil snapped a two-week losing streak, rising +5.2%.
• Meanwhile, bonds rebounded some of their losses from the previous week as yields fell. The 10-year U.S. Treasury yield retreated -16 basis points to finish at 4.32%, and the Bloomberg U.S. Aggregate Bond Index rallied +0.9% as bond volatility also declined.
• The Commerce Department reported that the advanced read on U.S. Retail Sales showed a jump of +1.4%, a 26-month high. The suspicion that the strength had much to do with front running tariff actions could be challenged by the point that sales at food services and drinking places were up a robust +1.8% in March after declining -0.8% in February.

Source: Bloomberg. Data as of April 17, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

U.S. stocks lag, but global stock and bonds rebound

The stock and bond markets were closed Friday in observation of the Good Friday holiday. But even with a holiday-shortened week, equity markets continued their choppy, topsy-turvy trading. The good news was that the levels of volatility have narrowed considerably since they surged in the days after the April 2 “Liberation Day” announcement of proposed reciprocal tariffs by the Trump administration. The VIX Index, or CBOE Volatility Index, measures the market’s expectation of 30-day forward-looking volatility, derived from S&P 500 index options prices. Often called the “fear gauge,” it typically rises during market uncertainty and falls in stable conditions. As recently as March 25, the VIX Index was 17 but spiked to 52 by April 8 in the aftermath of the tariff announcements. Levels above 30 are considered extreme and signal high market volatility and fear, but by Thursday’s close, VIX settled at 29.65, its first time below 30 since Liberation Day. Given recent trading, it was a favorable indication that all the tariff headlines aren’t rattling investors’ nerves as badly anymore. Over the weekend of April 12th, the Trump administration issued guidance that exempted many types of electronics from reciprocal tariffs and also indicated consideration of a temporary tariff exemption on imported vehicles and parts to give automakers more time to shift production to the U.S. That helped lift markets, and depress VIX, early in the week. But the tariff tit-for-tat persisted when it was announced that semiconductors will likely be shifted into another tariff bucket in the next month or two. Later in the week, China raised nontariff barriers against U.S. agricultural exports while the U.S. restricted the shipment of certain Nvidia semiconductors to China without a license. According to a Bloomberg report, China laid out preconditions for talks in which China asked that the U.S. designate a point person to lead the negotiations and appointed a new trade envoy, Li Chenggang, to lead any talks with the U.S. in the hope of reaching an agreement that Trump and Xi Jinping can sign when they meet in person. 

In the end, the S&P 500 Index lost -1.5% for the week. Technology stocks lagged in the wake of the chip export restrictions, sending the Nasdaq Composite Index down -2.6% over the week. Small cap stocks bucked the trend and finished positive, with the Russell 2000 Index gaining +1.1%. Crude oil snapped a two-week losing streak, rebounding +5.2% in the short week.

Federal Reserve Chairman Jerome Powell didn’t help the case for stocks when he made it clear he wouldn’t be coming to the rescue with lower rates amid the tariff turmoil. His hawkish comments at the Economic Club of Chicago on Wednesday, echoed recent comments from other Fed officials regarding their economic outlook, stating that tariff increases have been “significantly larger than anticipated,” and that “the same is likely to be true of the economic effects, which will include higher inflation and slower growth.

Following trends throughout this year, non-U.S. stocks outperformed again. Developed market international stocks (as measured by the MSCI EAFE Index) were up a strong +4.1% last week. Emerging market stocks (the MSCI Emerging Markets Index) were up a solid +2.1%. The U.S. Dollar Index continued its descent, sliding another -0.7% for the week, providing non-U.S. stocks a persistent tailwind.

Bonds bounced back last week from their losses the prior week. The 10-year U.S. Treasury (UST) and 2-year UST yields both fell 16 basis points to finish at 4.32% and 3.80% respectively. Like the VIX volatility index for stocks, U.S. Treasury Volatility reached its highest level since October 2023 the previous week with the MOVE Index hitting 139.88. Last week it had declined back down to 114.64. With bond yields and bond volatility falling, the Bloomberg U.S. Aggregate Bond Index rallied +0.9. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, gained +1.1% following a +1.3% gain the previous week. They were helped by the U.S. dollar decline and the ECB cutting rates by a quarter of a percentage point to 2.25%. U.K. inflation also came in at 2.6%, below expectations and down from 2.8% the prior month.

The Week Ahead

This economic calendar starts slowly this week with just the Conference Board’s release of the Leading Economic Index on Monday and the Richmond Fed Manufacturing Index on Tuesday. But things pick up on Wednesday with weekly mortgage applications, New Home Sales, S&P Global’s PMIs, and the Fed’s Beige Book. Thursday is the busiest day with weekly jobless claims, Building Permits, the Chicago Fed National Activity Index, Durable Goods Orders, Existing Home Sales, and the Kansas City Fed Manufacturing Index. Friday brings the next installment of Consumer Sentiment from the University of Michigan.

Earnings season really heats up with more than 100 S&P 500 companies reporting quarterly results. Notable names include Tesla on Tuesday and Alphabet (Google) – both after the market closes. Telecommunications companies report midweek with Verizon Communications on Tuesday, AT&T on Wednesday, and T-Mobile US on Thursday. Defense contractors GE Aerospace, Lockheed Martin, and Northrop Grumman release earnings on Tuesday.

Chart of the Week

The Commerce Department reported that the advanced read on U.S. Retail Sales showed a jump of +1.4%, a 26-month high. That matched Wall Street expectations and was up from an unrevised +0.2% bump the prior month. Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. Electronics and appliance store sales increased +0.8% month-over-month following a +0.5% increase in February. Automobile and parts dealers sales surged +5.3% month-over-month following a -1.6% decline in February. Auto sales account for one-fifth of all retail sales. Retail Sales Ex-Autos were up +0.5%, just above expectations of +0.4%. Sales Ex-Autos and Gas were even stronger, up +0.8%, ahead of expectations for a +0.6% rise. Both were revised higher from the prior month, to +0.7% and +0.8% respectively. The Control Group, a figure used to calculate Gross Domestic Product (GDP), rose +0.4%, below expectations for a +0.6% increase and down from +1.3% the prior month (which was revised higher from +1.0%). The suspicion that the strength has a lot to do with getting ahead of the tariff actions could be challenged by the point that sales at food services and drinking places were up a robust +1.8% in March after declining -0.8% in February.

U.S. Retail Sales Surge to 26-Month High

Retail sales jumped 1.4% MoM in March 2025

Source: U.S. Census Bureau, Trading Economics.

Did You Know?

DEBT (LITERACY) CRISIS – Despite nearly half of high school students (45%) saying they took a personal finance class in school, 80% of teens have either never heard of a FICO score or fully understand what it measures. Meanwhile, 43% of teens believe that an 18% interest rate on debt is manageable. (Source: Junior Achievement)

WASHED OUT – On April 7, 2025, just 14.1% of stocks in the Russell 3000 Index closed above their 200-day moving averages (DMA), the lowest reading since Sept. 26, 2022 (14.8%). After the 10 prior periods when the percentage of stocks above their 200-DMA first dropped below 15%, the Russell 3000 was higher three months later 90% of the time, with a median gain of +13.4%. (Source: Bespoke)

(MORE) TAX TIME  – According to the IRS, more than 20 million taxpayers request an extension to file their taxes. The due date to do so is Tax Day a.k.a. April 15. Otherwise, people who owe taxes can face penalties and interest compounded daily. (Source: The Wall Street Journal)

This Week in History

CNBC BIRTHDAY – On April 17, 1989, the Consumer News and Business Channel – much better known as CNBC – began broadcasting. Skeptics weren’t sure there was a market for the 24-hour business news network. CNBC wasn’t available in Manhattan at launch because it didn’t yet have an agreement with the borough’s main cable provider. In November 2024, current owner Comcast announced CNBC would be one of the entertainment and news channels it would spin off into a new cable venture.

Economic Review

• U.S. Industrial Production fell +0.3% in March, below expectations for a -0.2% drop and the prior month’s +0.8% rise (revised lower from +0.7%). However, Manufacturing Production was up +0.3% versus the +0.2% expected by Wall Street, though down from +1.0% the prior month (revised higher from +0.9%). Manufacturing represents about three-quarters of total Industrial Production and was up for a fifth straight month and remains non-recessionary. Year-over-Year, Industrial Production was up  +1.3%, following the prior month’s +1.4%. Capacity Utilization fell to 77.8% from an unrevised 78.2%, slightly below expectations for 77.9%. Capacity Utilization reflects how much a manufacturing plant is being used to produce things. Year-over-year, Capacity Utilization was up +1.8%.
• Imports Prices slipped -0.1% in March, after rising +0.2% the prior month after being revised down from +0.4%. Wall Street was expecting no change. Import Prices ex Petroleum were flat (0.0%), down from +0.1% the prior month (revised down from +0.4%) and below expectations for a +0.3% rise. Year over year, the cost of imports was up +0.9%, below expectations for +1.4% and down from +1.6% the prior month (revised down from +2.0%). Meanwhile, Export Prices were flat (0.0%), matching expectations and down from the prior month’s +0.5% reading (revised up from +0.1%). Export prices accelerated to +2.4% over the past year, down from last month’s +2.6% annual rate (revised up from +2.1%). 
• March Housing Starts slumped, driven primarily by single-family homes. Total housing starts dropped -11.4% month over month to a seasonally adjusted annual rate of 1.324 million units, missing expectations for a -5.4% drop to 1.420 million units. That compares to a +9.8% rise, or 1.494 million unites from the prior month (revised down from a +11.2% increase and 1.501 million units originally reported). Single-unit starts were down -14.2% to 940,000 units, compared to 1.096 million units the prior month. Multi-family units were up +10.7% after falling -18.8% the prior month. Housing starts peaked at 1.800 million units in April 2022. New construction starts surged +76.2% in the Midwest and were up +1.4% in the Northeast, but were down -17.1% in the South, and -30.9% in the West. On the other hand, Building Permits, one of the leading indicators tracked by the Conference Board and indicator of future construction activity, increased by +1.6% to an annualized rate of 1.482 million units (unrevised). That was better than the expected -0.6% decline to 1.450 million units and up from the prior month’s -1.0% decline to 1.459 million units. Single-unit permits dipped -2.0%, but multi-family units were up +9.3%. Regionally, permits were down -9.5% in the Midwest but up +3.0% in the South, up +5.8% in the West and up +4.3% in the Northeast. Year-over-year permits were down -1.7%.
• Homebuilder confidence improved in April, as the National Association of Home Builders (NAHB) Housing Market Index (HMI) rose to 40 from 39 the prior month. That was above expectations for 38. A year ago, the index stood at 51. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. The Current Sales component rose to 45 from 43, while Sales Expectations in the Next Six Months fell to 43 from 47, and Traffic of Prospective Buyers inched up to 25 from 24. For the month, 29% of builders reported cutting home prices, unchanged from the prior month. The average price reduction was unchanged at 5%. The use of sales incentives beyond price cuts was 61%, up from 59% the prior month.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, improved +11.9 points in April to -8.1, still in contraction territory. That was better than the -13.5 reading expected and up from an unrevised -20.0 the prior month. New Orders fell modestly at -8.8 but that was up from the prior month’s -14.9. Shipments remain modestly down at -2.9, but that was also a big improvement from -8.5 the prior month. Forward looking indicators fell for a third straight month with the index for Business Conditions Expected in Six Months falling another -20 points after the prior month’s -10 point drop, putting it in negative territory at -7.4. Of concern, the inflation components rose for a fourth consecutive month, with the Prices Paid indicator up +6 points to +50.8, and the Prices Received indicator up +6 points to +28.7.
• The Philly Fed Manufacturing Business Outlook Survey declined to -26.4 in April from an unrevised +12.5 the prior month. That was far below estimates for a drop to +2.2. Readings above zero indicate economic expansion. The indexes for New Orders and Shipments both declined sharply, the third straight month of declines for both, with New down -42.9 points to -34.2 and Shipments down -11.1 points to -9.1. The Employment index fell from +19.7 to +0.2. The average workweek index was down -21.4 points to -12.7. Firms indicated that current price indexes remained elevated, with Prices Paid and Prices Received up slightly.
• Weekly MBA Mortgage Applications fell -8.5% for the week ending April 11 following a +20.0% surge the prior week. The Purchase Index rose -4.9% after a rise of +9.2% the prior week. The Refinance Index dropped -12.4% after soaring +35.3% the prior week. The average 30-Year Mortgage Rate jumped to 6.81% from 6.61% the prior week, which had been their lowest level since October 2024.
• Weekly Initial Jobless Claims fell -9,000 to 215,000 for the week ending April 12, right in line with expectations. The prior week was revised higher by +1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose by +39,000 to 1,885,000 in the week ending March 29, worse than expectations for 1,870,000 claims. Last week’s reading was revised lower from 1,850,000 to 1,844,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.