Market Synopsis: Equities mixed, Treasury Yields up, Commodities up, Dollar down, Crypto up
Past Week Events:
On Wednesday and Thursday, investors gained valuable insight into the rate of inflation. Investors received both the CPI and PPI two important indicators of inflation. CPI inflation measures inflation from the consumer side and PPI from the manufacturer's side. CPI showed a marked decline in headline inflation as expected because of falling energy prices. However, core CPI, everything excluding food and energy, ticked up from 5.5% to 5.6%. This rise in core inflation was in large part due to an increase in shelter costs. PPI on the other hand surprised markets with a significant drop in wholesale inflation. This prompted stocks and bonds to rally.
On Wednesday coupled with CPI investors received the FOMC minutes. The FOMC, the Federal Open Market Committee, is the body of the Federal Reserve responsible for determining interest Rates. The minutes spooked markets. The most notable and key take aways were that the Federal Reserve now expects a “mild recession” as well as the fact that all members of the FOMC backed a 25bps hike in rates.
On Friday investors got retail sales numbers an important measure of how the economy is performing. The numbers illustrated a dreary picture as retail sales numbers fell 1% in March. This fall spurred concerns of stagflation in which inflation runs high but economic growth is slowed.
U.S leading economic indicators will be reported next week, and this indicator highlights trends in the broader U.S. economy. The U.S leading economic indicator has seen a decline 11 consecutive months in a row, with it falling 0.3% for the past month report of February. Investors are predicting this trend to continue.
The S&P Global Manufacturing and Services PMI Flashes for the month will be reported next week. This indicates the United States’ productivity in manufacturing and service sectors. The services flash was at 52.6 last month, and the manufacturing flash was at 49.2. A number above 50 indicates growth in that sector.
Market Snapshot:
Markets had many catalysts and headlines that sent markets higher than lower in what was a volatile week. The stock market narrowly eeked out a gain this week with the S&P 500 barely turning green. The main topics and concerns for the week were CPI, PPI, Retail Sales Data, and the FOMC minutes. In terms of inflation CPI and PPI painted conflicting pictures with core CPI ticking up while PPI posted a significant decline. To sow further confusion the FOMC minutes explained that the Federal Reserve now sees the potential for a “mild recession”. The final catalyst that rocked markets this week was retail sales data which illustrated a slowing economy. The practically unchanged stock market demonstrates how investors are still trying to process what things are going to look like down the road.
Quip of the Week: "I don't believe anyone can predict the market. I think the idea is to find situations where the odds are in your favor." - Michael Burry
U.S Equities:
Indexes(Week)
SPX 4,137.64(0.79%), DJIA 33,886.47(1.20%),
NASDAQ 12,123.47(0.29%), RUT 1,781.15(1.52%)
Sectors
Sectors were mixed this week again. The most notable outperformers were Financials and Energy. Financials outperformance this week can most likely be attributed to JP Morgans's stellar earnings which came out on Friday explaining the spike seen on the graph. Utilities and Real Estate on the other hand were the laggards falling over a percent.
Treasuries:
Treasury Yields ended the week higher all within the range of about 10-12bps. Looking at the graph we can see that CPI and PPI prompted a decline in yields. On the other hand, the negative Retail Sales data prompted a rise that led to all the treasuries closing the week in the green.
Commodities:
Oil
Massive news coming from OPEC shot oil prices up last week. Oil continued its meteoric rise to about $82.50 a barrel. These levels have not been seen for several months.
Gold
Gold closed the week just slightly in the green. Gold was rallying on the week until the Retail Sales data monkey hammered it into the ground with it recovering slightly.
BTC -30,571, 9.75% ETH - 2,101.78, 13.38%
Crypto has rallied massively with Bitcoin touching 31,000. Ethereum likewise rallied significantly to over 2,100 dollars a coin. There does not appear to be a direct catalyst for this most recent run-up, but interestingly it appears that FTC is considering re-opening as they were able to recover several billion dollars of customers funds.
Europe:
Stoxx 600- 466.91, 1.74% DAX -15,807, 1.34% FTSE 100 -7,871, 1.68%
Chart of the DAX (5-day)
Silvana Tenreyno, member of the Bank of England, recently expressed concerns about the ECB’s approach to stopping inflation.The ECB has been aggressively hiking rates, and Tenreyno believes patience is needed and that aggressively hiking rates in the short term may be an over adjustment and that it can be damaging in the medium-long term.
Asia:
XJO (Australia)-7,361, 1.98% Shanghai 180 Index-8,649, -0.09% Nikkei 225- 28,493, 3.54%
XJO 5-day Chart
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