Market Commentary – April 2025

Wall Street in April generally ebbed and flowed in response to uncertainty over U.S. trade policy and the impact of tariffs. April got off to a very rocky start as the stock market endured its worst week since the COVID pandemic. Investors moved away from risk following the announcement of President Trump's sweeping tariffs, particularly those aimed at China, and that country's immediate retaliatory response, which raised fears of rising inflation and global economic recession. Wall Street rebounded the following week after President Trump announced a 90-day pause on many of his new tariffs. Investors were then hit with President Trump's threat to fire Federal Reserve Chair Jerome Powell, which resulted in another negative week for the markets. Toward the end of April, Wall Street settled into a wait-and-see mode, which resulted in moderate gains as investors remained alert to further developments. However, contraction of the U.S. economy for the first time in three years drove stocks mostly lower to close out the month.

Growth of the U.S. economy was muted in March. The gross domestic product (GDP) fell 0.3% in the first quarter following a 2.4% increase in the fourth quarter. Net exports cut into GDP as imports jumped nearly 40% primarily due to businesses and consumers stockpiling goods in advance of potential tariff-driven price increases. Consumer spending rose 1.8%, the weakest increase since mid-2023. For 2024, GDP rose 2.8%, 0.1 percentage point less than the 2023 rate.

Job growth exceeded expectations in March, although the unemployment rate ticked higher. Wages rose 3.8% over the past 12 months. The number of job openings fell by 288,000 in March to 7.2 million, which was the lowest total in six months and well below expectations. However, this data does not reflect the layoffs and cuts sanctioned by the Trump administration. The latest unemployment data showed total claims paid in mid-April increased by more than 100,000 from a year earlier.

According to FactSet, despite concerns in the market about tariffs and higher costs, the S&P 500 reported earnings growth of 12.4% thus far in the first quarter, which is lower than the prior quarter's net profit margin but above the net profit margin from a year ago and higher than the five-year average of 11.7%. While first-quarter reporting is not complete, if the current data remains consistent, this will mark the fourth straight quarter of net profit margins above 12%. Among the sectors, six sectors have reported a year-over-year increase in net profit margins in the first quarter, led by communication services and healthcare. Conversely, the energy sector has reported the largest year-over-year decline in earnings of all 11 sectors. A drop in oil prices has contributed to the decrease in earnings for this sector.

Ten-year Treasury yields closed the month lower due to concerns that tariffs and government spending cuts may hurt the economy. The two-year note closed April at about 3.6%, down 28 basis points from a month earlier. The dollar index dipped lower from a month earlier, as it hovered around a three-year low of 98.3. Gold prices rose in April, marking its fourth straight monthly gain. Crude oil prices declined to their lowest levels since April 2021 as trade policy uncertainty weighed on demand. The retail price of regular gasoline was $3.133 per gallon on April 28, $0.029 below the price a month earlier and $0.520 lower than the price a year ago.

*Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Report

• Employment: Job growth exceeded expectations in March, with the addition of 228,000 new jobs after a downward revision of 48,000 in the prior two months. In March, the unemployment rate increased 0.1 percentage point to 4.2%. The number of unemployed persons changed little at 7.1 million in March. The number of long-term unemployed (those jobless for 27 weeks or more) was 1.5 million, essentially unchanged from the February figure. These individuals accounted for 21.3% of all unemployed persons. The labor force participation rate in March was 62.5%, up 0.1 percentage point from the previous month. Over the last 12 months, average hourly earnings rose by 3.8% (4.0% for the 12 months ended in February 2025). The average workweek was unchanged at 34.2 hours.
• FOMC/interest rates: The Federal Open Market Committee did not meet in April. However, President Trump has pushed for the Federal Reserve to lower interest rates. Thus far, Fed Chair Jerome Powell indicated that the current fiscal policy will be maintained until the Committee deems it appropriate to lower rates.
• GDP: The economy, as measured by gross domestic product, fell 0.3% in the first quarter of 2025 following an increase of 2.4% in the fourth quarter of 2024. Compared to the fourth quarter, the decrease in GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, a decrease in government spending, and a deceleration in consumer spending. These movements were partly offset by increases in investment and exports. Consumer spending, as measured by the personal consumption expenditures index, rose 1.8% in the first quarter, compared to a 4.0% rise in the fourth quarter. Spending on services rose 2.4% in the first quarter, compared with a 3.0% increase in the fourth quarter. Consumer spending on goods increased 0.5% in the first quarter (6.2% in the fourth quarter). Fixed investment increased 7.8% in the first quarter after decreasing 1.1% in the fourth quarter. Nonresidential (business) fixed investment rose 9.8% in the first quarter after falling 3.0% in the previous quarter. Residential fixed investment rose 1.3% in the first quarter following a 5.5% increase in the fourth quarter. Exports advanced 1.8% in the first quarter, compared with a 0.2% decline in the previous quarter. Imports vaulted 41.3% in the first quarter after ticking down 1.9% in the fourth quarter.
• Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income rose 0.5% in March, while disposable personal income also increased 0.5% last month after increasing 0.7% and 0.8%, respectively, in February. Consumer spending increased 0.7% in March after increasing 0.5% the previous month. In March, the PCE price index and the PCE price index less food and energy were each unchanged for the month after rising 0.4% and 0.5%, respectively, in February. Consumer prices rose 2.3% for the 12 months ended in March, down 0.4 percentage point from the same period ended in February. Core prices increased 2.6% over the last 12 months. In March, prices for goods fell 0.5%, while prices for services rose 0.2%. Food prices increased 0.5%, while energy prices fell 2.7%.
  • In what could be the calm before the storm, consumer prices slowed in March. The Consumer Price Index fell 0.1% last month after ticking up 0.1% (revised) in February. Over the 12 months ended in March, the CPI rose 2.4%, 0.2 percentage point below the rate for the 12 months ended in February. Core prices (excluding food and energy) inched up 0.1% last month and 2.8% since March 2024. Prices for shelter rose 0.2% in March (and 4.0% for the last 12 months). Food prices increased 0.4% last month after rising 0.2% in February, and 2.6% for the year. Energy prices fell 2.4% in March, pulled lower by a 6.3% decline in gasoline prices.
  • Prices at the wholesale level declined 0.4% in March, according to the latest Producer Price Index. Producer prices increased 2.7% for the 12 months ended in March after rising 3.2% for the 12-month period ended in February. Excluding food and energy, producer prices fell 0.1% in March but increased 3.3% for the year. In March, prices for goods declined 0.9% (+0.3% in February) and 0.9% since March 2024 (1.7% for the 12 months ended in February). Last month saw prices for services fall 0.2% after being unchanged in February. Prices for services have risen 3.6% for the 12 months ended in March, a decrease of 0.3 percentage point from the increase over the 12 months ended in February.
• Housing: Sales of existing homes decreased 5.9% in March and were 2.4% under the March 2024 figure. The median existing home price was $403,700 in March, above the February estimate of $396,800 and higher than the year-earlier price of $392,900. Unsold inventory of existing homes in March represented a 4.0-month supply at the current sales pace, marginally longer than the February supply of 3.5 months and well above the 3.2-month supply in March 2024. Sales of existing single-family homes fell 6.4% in March and were 3.2% below the estimate from a year earlier. The median existing single-family home price was $408,000 in March ($400,900 in February), above the March 2024 estimate of $396,600.
  • New single-family home sales rose 7.4% in March and were 6.0% above the March 2024 figure. The median sales price of new single-family houses sold in March was $403,600 ($411,500 in February), down from the March 2024 estimate of $436,400. The March average sales price was $497,700 ($492,700 in February), down from the March 2024 average sales price of $522,500. Inventory of new single-family homes for sale in March represented a supply of 8.3 months at the current sales pace, down from the February estimate of 8.9 months but above the 8.2-month supply from a year earlier.
• Manufacturing: Industrial production decreased 0.3% in March following a 0.8% advance in February. Manufacturing output gained 0.3% last month after climbing 1.0% in February. In March, mining increased 0.6%, while utilities dropped 5.8%, impacted by unusually warm weather. Over the 12 months ended in March, total industrial production was 1.3% above its year-earlier reading. Since March 2024, manufacturing increased 1.0%, utilities rose 4.4%, while mining increased 1.0%.
  • New orders for durable goods increased 9.2% in March, marking the third consecutive monthly gain. For the 12 months ended in March, durable goods orders advanced 5.5%. Excluding transportation, new orders were unchanged last month. Excluding defense, new orders advanced 10.4%. Transportation equipment, which increased 27.0%, rose for the third straight month and led the overall increase in new orders in March.
  • Imports and exports: Import prices decreased 0.1% in March following a 0.2% increase in February. The March decline was the first monthly drop since the index decreased 0.4% in September 2024. Prices for imports increased 0.9% from March 2024 to March 2025. Import fuel prices decreased 2.3% in March, which was the largest monthly drop since September 2024. Export prices were unchanged in March after rising 0.5% the previous month. Export prices have not declined on a one-month basis since September 2024. Export prices advanced 2.4% for the 12 months ended March 2025.
• International markets: Global markets were largely driven by tariff news throughout April. European and Asian stocks were mostly mixed for much of the month, ultimately closing April largely in the red. Elsewhere, the Ukraine war has depleted the Russian labor force, driving the unemployment rate to 2.3%. While the U.S. GDP declined in the first quarter, Mexico's GDP unexpectedly grew by 0.6% on a yearly basis. Canada's GDP also expanded, driven higher by a rise in household consumption expenditures. Eurozone GDP expanded by 0.4% in the first quarter. The Chinese economy grew by 1.2% in the first quarter, and Japan's GDP rose 0.6%. In April, the STOXX Europe 600 Index fell 1.8%; the United Kingdom's FTSE declined 1.3%; Japan's Nikkei 225 Index gained 1.2%; and China's Shanghai Composite Index ticked down 2.1%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® fell by 7.9 points in April to 86.0. The Present Situation Index, based on consumers' assessment of current business and labor market conditions, decreased 0.9 points to 133.5. The Expectations Index, based on consumers' short-term outlook for income, business, and labor market conditions, dropped 12.5 points to 54.4, the lowest level since October 2011 and well below the threshold of 80 that usually signals a recession ahead.

Eye on the Year Ahead

Despite the volatility in the stock market, data has shown the economy to be somewhat resilient so far this year. However, trade wars could impact the global economy, which could curtail economic growth moving forward. The Federal Open Market Committee meets during the first full week of May. Fed Chair Jerome Powell has indicated that the Federal Reserve will not make changes to interest rates unless it is in the best interests of the economy to do so, regardless of outside pressures.