Excellent article from Carl Icahn to kick off the week: Junk bonds now ‘even more dangerous’ than stock market.

On Friday the Dow rose 183 points to regain the 18,000 level closing at 18,024, but ended down -0.31% for the week. The NASDAQ likewise regained the psychologically important 5000 level, but gave up 86 points or -1.7% to end the week at 5005. The small-cap Russell 2000 bore the brunt of the selling giving up -3.11% for the week. The S&P MidCap 400 index also ended the week down -1.33%. Both the S&P 500 and Canada’s TSX shed -0.44% for the week.

In international markets, for the week Developed International was down -0.22%, while Emerging Markets slid -1.61%. Individually, the German DAX was down a heavy -3.02%, the French CAC 40 fell -2.98%, and the London FTSE fell -1.20%. In Asia, the Chinese Shanghai stock exchange composite had its eighth weekly gain up +1.09% and Hong Kong’s Hang Seng index also notched a slight gain, up +0.26%. Japan’s Nikkei was unable to hold the 20,000 level ended the week down -2.44% to close at 19,531.

Turning to commodities, gold gave up $2.70 an ounce, to close at $1177.20. Silver managed a $0.41 gain, to close at $16.12 an ounce, up +2.61%. Oil continues its recent rebound, up +3.20%, ending the week at $59.26 a barrel.

For the month of April, the US continued this year’s pattern of underperformance relative to the rest of the world (a contrast to the prior 4 years of US outperformance). US indices were the laggards again, finishing the month between -2.6% (SmallCaps) and +0.9% (S&P500 LargeCaps). On the other hand, most non-US indices were substantially better than the US. Canada’s TSX rose +2.2%, Developed International climbed +3.7%, and Emerging International rocketed higher by an impressive +6.9%.

In US economic news, the headline for the week was the shockingly low Gross Domestic Product (GDP) for the first quarter. It was reported at just an annualized +0.2%, missing the already-reduced consensus forecast of just +1%. Exports dropped -7.2%, likely due to the stronger dollar and West Coast port labor issues. Government spending at all levels fell and business investment sank -3.4%, its worst quarterly performance since the ’08-’09 recession. Government spokesmen expressed hope that GDP might follow the path it took last year when contraction in Q1 was followed by strong rebounds in the following two quarters.

The Institute for Supply Management (ISM) April manufacturing index remained at 51.5, the same as in March, while exports swung back into expansion territory. The April Purchasing Managers Index (PMI) manufacturing report noted that manufacturing lost momentum in April. Factory output and new orders both rose at slower rates and new export business declined for the first time since November. The PMI report for the Services sector, however, remained extremely strong at 57.8.

The Federal Reserve wants to see wages rising faster than inflation so that consumers can feel comfortable about their spending habits. The core inflation gauge favored by the Fed increased +1.4% versus a year ago, the same rate as in February. Annual wage growth rose just +0.7% in one report, but the Wages and Salaries component of the Employment Cost Index was up +2.5%., the best since 2008, giving rise to hope that wage gains may soon top inflation. In another hopeful sign, household debt continues to decline. Cleveland Fed Pres. Loretta Mester stated that better household finances will help drive US economic growth. Mester noted that “Household debt relative to disposable personal income has fallen to near its longer-run trend.”

In Canada, the Industrial Product Price Index ticked up +0.3% in March as petroleum prices rebounded. The index remains 1.8% lower for the year.

Eurozone unemployment remained at 11.3% in March, with the youth unemployment component being twice that at 22.7%. Germany had the lowest jobless rate at 4.7% while Greece and Spain had the highest at 25.7% and 23.0%. In Germany, retail sales dropped -2.3% in March versus expectations of a +0.5% increase, but sales remain +3.5% higher than year ago and consumer confidence remained high. In France, producer prices gained +0.1% in March as expected, but are still -2.2% lower versus a year ago.

Japan’s sovereign debt rating was cut to single-A by Fitch Ratings as the government delayed a planned tax hike to reduce its debt burden. Fitch stated that the government’s reliance on stimulus spending to support its economy was the reason for the downgrade. Japan’s retail sales had a large -9.7% yearly decline in March, worse than the -6.8% expected. March was the third straight month to record year-on-year declines.

Apple released its second-quarter revenue numbers last week
Finally, tech behemoth Apple released its second-quarter revenue numbers last week. Revenues for the quarter came in at $58 billion and earnings came in at $13.6 billion. Since the beginning of the fiscal year about 70% of Apple’s revenues came from iPhone sales and sales in China were up a huge +70% from a year ago. Apple CEO Tim Cook has described Apple’s revenues as a “three-legged stool” with revenues from the iPhone, iPad and Mac. Business Insider dug a little deeper into the numbers and discovered that Cook’s iPad “leg” is a weak one, with negative year-over-year sales growth in most quarters of the last two years.

Further, since Mac sales are puny compared to iPhone sales, Business Insider concludes that contrary to Cook’s assertion, Apple instead is a “one-legged stool” with that one leg being described by an analyst as “CHINA’S MIDDLE CLASS LOVES IPHONES”.