This week's economic data revealed a split in the housing market, with new home sales unexpectedly surging while existing home sales declined. However, the overarching concern remained the continued and significant deterioration in consumer sentiment, which sank to near-record lows driven by worries about trade, inflation, and future income. Despite this growing pessimism, the stock market experienced significant mid-week gains amid emerging signals of softening trade talks, offering a potential glimmer of hope in an otherwise downbeat economic landscape.
Michigan Consumer Sentiment
Consumer sentiment fell for a fourth straight month as ongoing economic uncertainty and inflation worries continue to drag down consumer attitudes. The Michigan Consumer Sentiment Index fell 4.8 points to 52.2 in April, one of its lowest readings on record. This represents an 8.4% decline from March’s final reading and a 32.4% drop from one year ago, the largest annual decline since July 2022.
The current conditions index dropped to its lowest level since 2022 while the expectations index sank to a 45-year low. Consumers expressed mounting fears regarding trade policy uncertainty, potential resurgence of inflation, worsening views of the labor market, and weaker income growth in the year ahead.
Inflation expectations continued to rise for both the near and long term. Year ahead expectations rose for a fifth straight month to 6.5%, the highest level since November 1981, while five-year expectations jumped to 4.4%, the highest since 1991.
The Consumer Discretionary Select Sector SPDR ETF (XLY) is tied to consumer sentiment.
New Home Sales
New home sales rose more than expected in March, reaching their highest level in six months. Sales were at a seasonally adjusted annual rate of 724,000 units last month, outpacing the 684,000 forecast. This represents a 7.4% increase from February and a 6.0% increase from one year earlier..
The median price for a new home has been trending down over the past 2.5 years. In March, prices fell for a second straight month to $403,600. New home prices were down 1.9% from February and down 7.5% from a year ago, the largest annual decline since August.
Existing Home Sales
While new home sales reached a six-month high, existing home sales slowed to a six-month low as buyers seemed to lean towards new construction last month. Existing home sales sank in March, with their largest monthly decline since 2022. Sales were down 5.9% from February to a seasonally adjusted annual rate of 4.02 million units, the slowest pace in six months. The latest figures were lower than the expected 3.0% decline and 4.14 million units.
Housing affordability remains a challenge with both mortgage rates and home prices remaining elevated. The median price for an existing home rose for a second straight month, breaking $400,000 for the first time this year. Home prices were up 1.7% from February and up 2.7% from a year ago, marking the 21st consecutive month of annual price increases.
Market Reactions
The S&P 500 posted four straight days of gains last week, its longest winning streak since January. The index finished up 4.6% from the previous week. As a result, the SPDR S&P 500 ETF Trust (SPY) rose 4.6% last week. Meanwhile, the S&P Equal Weight Index was up 2.9% from the previous week and the Invesco S&P 500® Equal Weight ETF (RSP) rose 2.9%.
The yield on the 10-year note ended April 25th, 2025 at 4.29% while the 2-year note ended at 3.74%.
The CME FedWatch Tool currently shows a 97% likelihood that the Fed will hold rates steady at their meeting next month. Markets are pricing in four 25 basis point cuts for later this year coming at the June, July, October, and December meetings with one additional 25 basis point cut in 2026.
Economic Data in the Week Ahead
This week’s data points, spanning consumer sentiment, housing market dynamics, labor market conditions, inflation, and manufacturing activity, will collectively offer vital clues about the trajectory of the U.S. economy.
Tuesday brings a trio of releases: the Conference Board’s Consumer Confidence Index, providing a read on household sentiment; the S&P CoreLogic Case-Shiller Home Price Index, detailing housing market trends; and March’s Job Openings and Labor Turnover Summary (JOLTS) report, illuminating labor demand. Wednesday's data includes the initial estimate for first-quarter GDP, revealing the pace of economic growth, alongside the PCE Price Index, the Fed’s preferred inflation gauge. Thursday will spotlight the health of the industrial sector with the ISM Manufacturing PMI. Finally, Friday's BLS employment report will offer the latest snapshot of the labor market, encompassing job creation and unemployment.
For more news, information, and strategy, visit the Innovative ETFs Channel.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our podcasts.
Read more commentaries by VettaFi
