Market Synopsis: Equities down, Treasury Yields up, Commodities down, Dollar up, Crypto down
Past Week Events:
This week on Thursday investors received the U.S. leading economic indicators which serve as a measure of the general performance and health of the U.S economy. The amalgamation of a variety of different indicators provides a good overview of the state of the economy and where its heading. The index fell for the 12th straight month by 1.2%. This decline is highly indicative of a looming recession.
On the other hand, investors received both The S&P Global Manufacturing and Services PMI on Friday which provide a measure of business activity. The services flash came in at 52.6 last month, and the manufacturing flash came in at 49.2. A number above 50 indicates growth in that sector. Much to the surprise of economists and investors Manufacturing increased to 50.4 in the same period from 49.2 and Services PMI moved higher to 53.7, exceeding analysts' forecast of 51.5. This ran counter to the recessionary tone set by the leading economic indicators.
Gross Domestic Product (GDP) is released next week. GDP is the value of the goods and services produced within a country. The market forecasts it to increase 1.8% year-year, which the previous release being a 2.6% increase year-year.
PCE serves as another key measure of inflation. It is very similar to the CPI(Consumer Price Index) as it measures the prices of goods and services consumed by households, but the way it is calculated differs. The change from one year ago is around a 5% increase, but this has been going down since the start of 2023. This measure will be important to test the strength of inflation.
The unemployment rate will also be released next week. The unemployment rate is the number of people who are unemployed but are actively looking for work. Generally as inflation increase the unemployment rate decreases. The unemployment rate has been decreasing since covid, and despite recent quantitative tightening (increasing interest rates to slow cash flow in the economy) unemployment has stayed low, at around a 3.5% mark.
Market Snapshot:
Markets had a rather slow week largely unchanged as no catalyst was able to drive the market significantly lower or higher. It seems investors are in a limbo of sorts as they try to weigh the contradictory signals data is sending. On Thursday the leading economic indicators illustrated a dreary picture forecasting the U.S. to go into a recession while on Friday PMI data demonstrated strength and growth. This confusion is most likely what left the market largely unchanged. Treasury Yields were about to close the week out lower but with the spike because of strength illustrated by the PMI numbers Yields closed higher. Commodities were on the whole lower except for silver which was largely unchanged. Crypto fell dramatically lower appearing to lose some of its momentum.
Quip of the Week: "Know what you own, and know why you own it." - Peter Lynch
U.S Equities:
Indexes(Week)
SPX 4,133.52(-0.10%), DJIA 33,808.96(-0.23%),
NASDAQ 12,072.46(-0.42%), RUT 1,791.51(0.58%)
Sectors
Like the major indices most sectors did not experience any significant volatility on the week. However, Energy was the worst performer down just under 3 percent while Consumer Staples and Real Estate outperformed. Energy’s underperformance can be attributed to this week’s decline in commodities prices with Oil now near where it was pre-OPEC production cut.
Treasuries:
Treasury Yields were able to eek out a gain on the week with the longer-end(longer-dated Treasuries) rising the least. Treasury Yields were on a steady decline from Wednesday up till Friday where it seemed yields would be lower, but strong PMI data tipped the scales in the other direction.
Commodities:
Oil
If you will recall we covered a couple of weeks ago a spike in Oil prices due to OPEC’s decision to cut daily production by a million barrels per day which in turn would decrease supply. Interestingly, the run-up investors saw as in large part subsided with Oil returning to levels before the cut.
Gold
Gold closed the week lower on the week closing under $2000 an ounce. On an unrelated note to markets, about 15 million dollars worth of gold was stolen from Toronto Airport.
BTC -27,369, -10.09% ETH - 1,841.51, -12.62%
Their was carnage in crypto markets this week with Bitcoin tumbling over 10 percent to under 28,000 and Ethereum down 12% below 1,900. This sharp decline was not isolated as numerous other altcoins fell hard on Wednesday.
Europe:
Stoxx 600- 469.00, 0.45% DAX -15,881, 0.47% FTSE 100 -7,914, 0.54%
Chart of the DAX (5-day)
The EuroZone is seeing in increase in demand in the economy, with the recent PMI release being 54.4. The mark of growth and contraction is 50 in PMI, which above 50 being growth and below 50 being contraction in the economy. There is an evident increase of demand, however, there is a widening gap between labor mismatches. Some industries more service based are seing economic recovery, however, the manufacturing sector is still seing a dark hole.
Asia:
XJO (Australia)-7,330, -0.42% Shanghai 180 Index-8,583, -0.76% Nikkei 225- 28,564, 0.25%
XJO 5-day Chart
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