MICHAEL J. HALLORAN, CFA | Equity Strategist of Janney Montgomery Scott
Wyncote Wealth Management Group

Highlights for this week include: 

• April’s retail sales report indicates that the U.S. consumer remained resilient at the start of the second quarter, despite pressure from higher gasoline prices. 
• April industrial production came in much better than expected, with underlying details showing broad- based gains. 
• First-quarter earnings remain exceptionally strong, led by leading technology firms. 
• Major stock indexes remain near all-time highs, supported by resilient economic readings and robust corporate profitability that continue to exceed expectations. 
• While the Iranian conflict remains a major concern, the positive performance of stocks and corporate bonds suggests the market is focused on economic fundamentals and profitability and is looking past the conflict. 

April Retail Sales Consistent with a Resilient Consumer 

Despite higher inflation, consumer spending remained strong in April. Retail sales rose 0.5% for the month, matching consensus expectations, and were revised higher for prior months. While April’s overall gain was fueled by another large jump at gasoline stations (+2.8%) as national gas prices moved to their highest level since 2022, gains were broad-based with nine out of thirteen major sales categories rising for the month. April’s gains reflected strong increases for non-store (ecommerce) retailers and food and beverage stores, which more than offset declines in home furnishing and apparel stores. 

This indicates that the U.S. consumer remained resilient at the start of the second quarter, despite pressure from higher gasoline prices. Consumers have benefited from a healthy labor market and big tax refunds. High-end consumers, who account for the majority of spending, are benefiting from record-high net worth as stocks hover near all-time highs. 

April’s Industrial Production Surprises to the Upside 

Industrial production surprised to the upside in April, beating even the most optimistic forecast of any economics group surveyed by Bloomberg. Overall activity rose 0.7%, with underlying details showing broad- based gains. There was also an upward revision to the initial March estimate. The largest positive contribution in April came from the manufacturing sector, which posted a gain of 0.6%. The volatile auto sector rebounded in April, with activity jumping 3.7%. Production in high-tech equipment, which has been a reliable tailwind recently due to investment in Al as well as the reshoring of semiconductor production, increased 1.0% in April. High-tech manufacturing is up a strong 9.2% in the past year, the fastest 12-month growth rate of any major category. Meanwhile, manufacturing of business equipment rose 1.5% in April and was up 6.0% in the past year, signaling a broader reindustrialization.

Utilities output (which is volatile and largely dependent on weather from month to month) also posted a gain of 1.9%. Notably, this series has been on an upward trend since 2023, following nearly 20 years of stagnation, as power-hungry data centers have boosted demand for U.S. power generation. 

Manufacturing activity is benefiting from massive Al-related investments, the lagged impact of Federal Reserve interest rate cuts, and the major investment incentive provided by the immediate expensing of corporate investments included in last year’s passage of the One Big Beautiful Bill. 

First Quarter Earnings Continue to Impressively Come in Better Than Expected 

With 94% of S&P 500 companies having reported earnings, first-quarter (Q1) 2026 results have been exceptionally strong, with the earnings growth rate for the S&P 500 now coming in at 29%. This marks the highest earnings growth rate reported by the index since Q4 2021 (32.0%). On March 31, the estimated (year- over-year) earnings growth rate for the S&P 500 for Q1 2026 was 13.1%. 

Mega-cap technology firms continue to deliver exceptional earnings growth, with the six largest technology firms showing earnings growth of 63% in the first quarter compared to the rest of the market at 18%. 

Market Dynamics Remain Positive 

The S&P 500 and other important indexes remain near all-time highs. Stocks are being supported by resilient economic readings and corporate profitability that is exceeding expectations. 

Corporate bonds are signaling a low probability of future defaults – a sign of a robust economy. Economically sensitive sectors and speculative growth stocks are performing well, while defensive sectors are underperforming. International markets remain in an uptrend, which provides another signal of a sound 

market. Higher oil prices and Treasury bond yields remain a concern as the Iranian conflict drags on, but the positive performance of stocks and corporate bonds suggests the market is focused on positive economic fundamentals and profitability and is looking past the Iranian conflict.

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