Succinct Summation of the Week's Events

Succinct Summation of the Week's Events:

Positives,

1)Within the payroll report, the household survey said jobs grew by 436k, almost matching the rise in the labor force of 518k. The result was no change in the unemployment rate of 4.2%. The all in rate ticked lower by one tenth to 7.8% vs 7.9% in March, 8% in February and 7.5% in January. Hours worked ticked up to 34.3 from 34.2 where no change was expected. Wages were up by .2% m/o/m and 3.8% y/o/y, one tenth under the estimate. Combine the two and we saw a gain of .2% m/o/m and 4.1% y/o/y. The participation rate was 62.6% vs 62.5% in the month before. The key 25-54 yr old cohort rebounded by 3 tenths to 83.6% which is the most since last September.

2)Growing rumblings that both the US and China are eager to have a coffee talk.

3)The March PCE inflation data was as expected both headline and core when including the February estimate.

4)April vehicle sales totaled 17.27mm, about 100k more than expected. This follows the March read of 17.7mm and Wards Automotive said this, "Tariff-related buying lifted sales over the past two months to a seasonally adjusted annual selling rate of 17.6 million, well above the roughly 16.0 million they would have totaled otherwise. There was some indication that the surge was decelerating by the end of the month, probably due to tariff “exuberance” starting to dry up and because of a drain to inventory. There was more strength, in general, in demand for fullsize and luxury-segment trucks than for more affordable vehicles, including cars and small and midsize CUVs and SUVs."

5)The April ISM manufacturing index remained below 50 but was little changed at 48.7 vs 49 and slightly above the estimate of 47.9. Of 18 industries asked, 11 saw growth vs 9 in March while 6 experienced a contraction. The bottom line from the ISM, "Demand and production retreated and destaffing continued, as panelists' companies responded to an unknown economic environment. Prices growth accelerated slightly due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth."

6)The Apartment List National Rent Report covering April saw the 3rd straight month that new rent prices went up as they typically do seasonally this time of the year. The increase was .5% m/o/m though still down .3% y/o/y. And, "Despite the cooldown, the typical rent price remains 21% higher than its January 2021 level." On the supply side, "our national vacancy index ticked up to 7%, setting a new record high in the history of that monthly data series, which goes back to the start of 2017."

7)Pending home sales in March rose 6.1% m/o/m, well better than the estimate of 1% and helped by the spring selling season.

8)From Amazon: "As always, we're working to keep prices low. And with this being an uncertain moment for consumers, it's even more important than it typically is...I thought I'd share a few thoughts on the prospect of heightened tariffs on our stores business. Obviously none of us know exactly where tariffs will settle or when. We haven't seen any attenuation of demand yet. To some extent, we've seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact. We also have not seen the average selling price of retail items appreciably go up yet. Some of this reflects some forward buying we did in our first party selling, and some of that reflects some advanced inbounding our third party sellers have done, but a fair amount of this is that most sellers just haven't changed pricing yet." On spending, "Now turning to our CapEx, which was $24.3 billion in Q1. The majority of this spend is to support the growing need for technology infrastructure. It primarily relates to AWS as we invest to support demand for our AI services and increasingly in custom silicon, like Trainium, as well as tech infrastructure to support our North America and International segments."

9)From Microsoft: "It was a record quarter driven by continued strength in Microsoft Cloud, which surpassed $42 billion in revenue, up 22% in constant currency. Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth...We continue to see strong demand for our cloud and AI offerings as they help customers drive productivity, increase efficiencies, and grow their businesses. And again this quarter, revenue from our AI business was above expectations." They had a slight step down on CapEx from the previous quarter with spending of $21.4 billion, still a big number but "slightly lower than expected, due to normal variability from the timing of delivery of data center leases...roughly half of our cloud and AI related spend was on long lived assets that will support monetization over the next 15 years and beyond. The remaining cloud and AI spend was primarily for servers, both CPUs and GPUs, to serve customers based on demand signals, including our customer contracted backlog of $315 billion."

10)From Meta Platforms: "Within ad revenues, the online commerce vertical was the largest contributor to y/o/y growth. On a user geography basis, ad revenue growth was strongest in Rest of World and North America at 19% and 18%, respectively. Europe and Asia Pacific grew 14% and 12%." CapEx was $13.7 billion, "driven by investments in servers, data centers, and network infrastructure...We anticipate our full year 2025 capital expenditures, including principal payments on finance leases, will be in the range of $64 billion to $72 billion, increased from our prior outlook of $60 billion to $65 billion. This updated outlook reflects additional data center investments to support our AI efforts as well as an increase in the expected cost of infrastructure hardware."

11)From Mastercard: "We're operating in an uncertain environment. Consumer and business sentiment has weakened, primarily due to concerns surrounding the impact from tariffs and geopolitical tensions. On the other hand, so far this year, the fundamentals that support consumer spending have been solid and our drivers are generally stable...In the US, we see generally stable spending. Europe, a bit more of a challenging environment, but also generally spending. In Asia, if you look at another big region there, China came a little bit ahead of what they said, what they initially had projected on their economic growth."

12)From Visa: "Our key business drivers were strong. Even with the lapping of Leap day from last year and consumer spending remained resilient in an uncertain and dynamic environment...we have not seen any signs of overall consumer spending weakening. While spending growth differs among consumer spend bands, with the most affluent growing the fastest, all spend bands remain resilient and consistent with past quarters."

13)From MGM Resorts: "April in Las Vegas is shaping up to be a record April for the company."

14)From Live Nation: On broader demand trends in light of everything going on, "it's a question every CEO gets asked and are you feeling the consumer pullback at all. We haven't felt it at all yet...We put a lot of shows onsale in the month of April. Chris Brown sold 1 million tickets this month, Mumford & Sons 300, Suicide Blonde, Lady Gaga sold out, up 18% y/o/y. So any data we have right now up until last week, whether it's a festival onsale or a new tour or show that went onsale, complete sell-through and strong demand and beating last year's numbers. So, we haven't seen a consumer pullback in any genre, pub, theater, stadium, amphitheater, we haven't seen it all happen yet." With sponsorships, "we've got over 80% of our business contracted this year so far. We're up over last year. Again, because we deal on more longer term relationships, we don't feel it."

15)From Airbnb: While less travelers are coming from Canada, they are capturing their travel elsewhere. "At the same time, what we're seeing is within that corridor, guests who would have in a prior year come to the US are simply choosing a different location. So I think Canada is the most obvious example where we see Canadians are traveling at a much lower rate to the US, but they're traveling more domestically. They are traveling to Mexico, they are going to Brazil, they're going to France, they're going to Japan. And I think what that tells you about the distribution is that, in this moment, it's not necessarily that people don't want to travel, they are just using different destinations."

16)From Booking Holdings: "At the start of the 2nd quarter, we are currently seeing stable levels of global leisure travel demand despite rising geopolitical and macroeconomic concerns...Looking at our room nights growth by region in the first quarter, Europe and Asia were up high single digits, Rest of World was up low double digits, and the US was up low single digits."

17)From Royal Caribbean: "as we look across the current macro landscape, we recognize that there is heightened uncertainty. However, research, including the direct surveying of our customers, continue to show that that propensity to cruise remains encouraging...We are certainly not immune to macro volatility, but what we're seeing on the ground in our bookings and the real time spending occurring on our ships is that consumers are still prioritizing experiences, planning to spend more on them this year, and are seeking value that we are well positioned to offer."

18)From Brinker's: "Except for a slight dip in both sales and traffic in February due to weather, Chili's delivered consistent results every period of the quarter, and has maintained this momentum into April. We now believe more than ever, consumers will continue to reward Chili's as a brand that consistently provides great food, service, and atmosphere at an exceptional value."

19)From PPG Industries: "Demand for various general industrial markets improved in the first quarter and we see increasing momentum in the coming quarters. While auto OEM industry demand forecasts were slightly reduced, our share gains are beginning to yield benefits, and we expect to outperform the market beginning in the 3rd quarter."

20)From Vulcan Materials: "On the public side, infrastructure related spending remains a catalyst with 2/3 of the highway dollars yet to be spent. Public construction is poised for continued steady demand growth."

21)The April Eurozone manufacturing PMI was revised slightly higher to 49 from its initial print of 48.7 and vs 48.6 in March.

22)The Eurozone grew by .4% q/o/q, twice the estimate and by 1.2% y/o/y.

Negatives,

1)April payrolls grew by 177k, 39k above expectations but the two prior months were revised down by a combined 58k. The average duration of unemployment rose to 23.2 from 22.8 in March, 21.3 in February and 22 in January. The birth/death model overstated today's data very likely as it added 393k jobs vs 363k in April 2024, 378k in April 2023 and vs 281k in April 2019.

2)ADP said just 62k private sector net jobs were created in April vs the estimate of 115k.

3)Initial jobless claims rose to 241k from 223k and that was well above the estimate of 223k. The 4 week average rose to 226k from 221k. Also of importance, continuing claims jumped to 1.916mm from 1.833mm and 50k above the estimate. That is the highest level since November 2021.

4)Challenger said this on the labor market, “Though the Government cuts are front and center, we saw job cuts across sectors last month. Generally, companies are citing the economy and new technology. Employers are slow to hire and limiting hiring plans as they wait and see what will happen with trade, supply chain, and consumer spending,” Andrew Challenger, Senior Vice President and workplace expert for Challenger, Gray & Christmas.