Market Synopsis: Equities up, Treasury Yields down, Commodities up, Dollar down, Crypto mixed
Past Week Events:
The Institute of Supply Management released the Purchasing Managers' Index providing valuable insight into manufacturing and the economy. The index measures through surveys of private sector companies the level of manufacturing in the United States. The index showed a decline for 5th month in a row ringing alarm bells for a potnetail recession.
On Tuesday we gained valuable insight into the number of job openings available. The number fell to 9.9 million a 21 month low. This drop appears to be a optimistic sign for an extremely tight labor market in which unemployment has been at record lows. This would tilt the Federal Reserve towards a more dovish stance.
However, unfortunately on Friday investors received the jobs report showing that unemployment actually fell to 3.5 percent compared to 3.6 percent. 236,000 jobs were gained in March showing that the labor market is still tight. This raised the odds of a another rate hike putting the Federal Reserve in a challenging spot. They need to continue to tighten but hopefully not until something breaks.
CPI, Consumer Price Index, will be released next week. CPI is a key indicator of inflation, as it measures the change in prices of a certain basket of goods and services. The Fed has been increasing interest rates to mitigate inflation, and headline CPI has been on the decline. But there has been an important distinction between core CPI and headline. Headline includes energy and food, and the prices of energy and food have been going down, but core inflation cuts energy and food as they are very versatile. Core CPI has been, on the contrast, going up. This is frightening, and the market will be on the lookout this next week.
PPI, which is very similar to CPI, will be released next week as well. CPI measures the change in prices paid by consumers, and PPI measures the change in selling prices on the producers’ side. These are both two very crucial economic indicators which will be highly anticipated.
Market Snapshot:
Markets had an interesting week with conflicting macro data. Stocks ended the week higher with Treasury Yields tumbling. Investors received ISM manufacturing and services data this week illustrating a dreary picture for the broader economy as both posted a decline. Manufacturing fell a decline for the 5th month in a row. The most chaotic aspect for investors was trying ot unravel the jobs data this week. On tuesday we saw that job openings declined which raised fears of a slowing of the economy but optimism for a potential pause in rate hikes. However, conflicting on Friday unemployment dropped even further to 3.5%. This raised concerns and odds that the Federal Reserve will have to keep hiking rates. All in all it was an interesting week with stocks moving slightly higher maintaining their slight optimism.
Quip of the Week: "In the short run, the market is a voting machine but in the long run, it is a weighing machine." - Benjamin Graham
U.S Equities:
Indexes(Week)
SPX 4,105.02(1.34%), DJIA 33,485.29(1.91%),
NASDAQ 12,087.96(0.62%), RUT 1,754.46(-0.79%)
Sectors
Sectors were mixed this week with defensives like Consumer discretionary and industrials fell the most down over 3%. The shift away from defensives is interesting as that may indicate concerns of a recession at least now have waned. On the other hand, Energy and healthcare were the top performers up about 3%.
Treasuries:
Treasury Yields fell dramatically lower on the shorten week. All of the ISM and Jobs data seems to have convinced markets at least in the short term of a potential shift in the Fed’s stance. However, yields did spike on Friday due to the unexpected drop in unemployment. The spike however did subside and other factors seemed to prevail.
Commodities:
Oil
Massive news coming from OPEC shot oil prices up on the week. OPEC announced that they were going to cut production by 1 million barrels of oil per day. This massive slash in production is going to significantly strain supply because of already high demand. This production cut sent oil up over 80$ a barrel.
Gold
Gold has rallied significantly on the week making it the second highest weekly close ever. It seems that concerns over financial stability are still lingering and investors are still in safe haven assets like gold.
BTC -27,883, -1.79% ETH - 1,854.05, 2.03%
Crypto was all over the place this week with Bitcoin falling lower while Etheremum rallied about 2%. On another note, interestingly rumours have begun to circulate that Steve Jobs may be Satoshi Nakomoto due to the fact that a copy of Bitcoin’s whitepaper was found on a technologist Mac.
Europe:
Stoxx 600- 458.94, 0.90% DAX -15,597, 0.49% FTSE 100 -7,741, 1.59%
Chart of the DAX (5-day)
Investors have recently began to predict a near future monetary easing in central banks, as the fall of massive banks like Credit Suisse can attribute partly to the high interest rates. Central European monetary policymakers have recently confirmed that they will continue to hike rates in order to mitigate inflation, despite the demise of these banks.
Asia:
XJO (Australia)-7,219, 1.36% Shanghai 180 Index-8,656, 1.69% Nikkei 225- 27,518, -1.87%
XJO 5-day Chart
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