Market Synopsis: Stocks Up, Treasury Yields down, Commodities Mixed, Dollar Flat, Crypto Down
Past Week Events:
This Week's Events:
The Consumer Confidence Index, which measures consumers’ optimism or pessimism about the state of the overall economy, fell from 120.2 to 117.2 in June amid less optimistic Consumer sentiment about the financial and labor markets, and their short term pessimistic forecast for this same concern Consumer spending for is very important, so a decline in confidence could be a sign that people are starting to feel the effects of inflation and inflation
Powell's view on inflation: Federal Reserve Chairman Jerome Powell downplayed the risk of steady inflation in a recent statement, pointing out that current inflationary pressures are temporary and mainly due to supply chain difficulties and other transitory factors. He also stressed that the Fed is prepared to adjust its policies if inflation proves more sustainable than expected. But he also noted that the economy remains far from the Fed's employment and inflation targets, suggesting the central bank is in no hurry to tighten monetary policy.
PCE inflation slowed in May: The personal consumption expenditure (PCE) index, the Federal Reserve’s preferred measure of inflation, rose a modest 0.3% in May, in line with expectations. On a year-over-year basis, core PCE excluding food and energy rose 4.6%, slightly less than expected. Despite the retreat in inflation, consumer spending rose just 0.1% for the month, a sharp decline from the 0.6% increase in April. This drop in spending occurred despite a 0.4% rise in personal income, indicating that consumers are becoming more cautious with their spending as prices rise
Next Week:
The S&P Global Manufacturing and Services PMI Flashes for the month will be reported next week. This indicates the United States’ productivity in the manufacturing and service sectors. The Services PMI Flash slightly contracted to 54.1 last month, and Manufacturing PMI Flash took a toll down to 46.3. A number above 50 indicates growth in that sector.
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. The unemployment rate has expressed an obvious trend of contraction since high pandemic levels. The unemployment rate was at 3.7% last month, and this upcoming report is forecasted to come in at 3.6%.
Market Snapshot:
The Global Macro Surprise Index moved back into negative territory despite significant differences in US-reported macro data. and Europe in financial markets this week, with the former accelerating as the latter fell. The expected quantitative change between these macro moves did not change dramatically over the year. The Nasdaq Composite, led by a select few tech giants in the equity market, surged to H-1, becoming the largest H-1 gain marker since 1983. Tech and discretionary stocks outperformed H1 while Energy & . Utilities fell. They were sent to the U.S. funds mixed in H1 with smaller yields increasing sharply while 30Y yields decreased slightly. The yield curve fell in Q2, flattening to its biggest quarter-end reversal to date. The dollar finished the month lower, and the quarter was flat, down slightly year-to-date. Bitcoin turned in the best H1 since 2019, rising more than 80% to $31,000; 60% more with Ethereum. Things have fallen for the fourth year in a row at 5. Oil fell for the second consecutive year, gold managed to gain in H1
Quip of the Week: "The stock market is filled with individuals who know the price of everything, but the value of nothing." - Jesse Livermore
U.S Equities:
Indexes(Week)
SPX 4,450.38(2.35%), DJIA 34,407.60(2.02%),
NASDAQ 13,787.92(2.19%), RUT 1,888.73(3.68%)
Sectors:
All sectors ended positively this week, illustrating the market’s optimistic tone recently. Inflation has been slowing down, and although the Federal Reserve has reassured the economy that it is most definitely possible that they will continue to hike rates, it is also very possible that they will soon pause rates. This has brought hope to the market, and analysts have even considered calling the current market “bullish.” The reason for Real Estate’s success is mainly due to the trend of the entire market, but also the builder sentiment report reached positive territory for the first time in 11 months, indicating a strong housing market.
Treasuries:
Yields stabilize in inflationary context: US. Treasury yields saw little change on Friday as investors weighed the latest inflation data and its potential impact on the Federal Reserve’s future interest rate decisions. The 10-year Treasury yield declined slightly on basis points to 3.841%, while the 2-year Treasury yield rose 2 basis points to 4.902% This figure rose 4.6%, slightly below the 4.7% of economists predicted by the. As Wall Street continues to anticipate interest rate hikes, traders are pricing in an 84% chance of a hike at the central bank’s July meeting. Fed Chairman Jerome Powell reiterated this week that rates could be raised because more restrictions are needed to curb inflation. But he also said the process of bringing inflation closer to the Fed's 2% target is expected to take "a good deal of time."
Commodities:
Oil
Uncertainty Looms Over Global Oil Market: The current state of global petroleum prices seems to be in a balanced state, given the existing levels of stockpiles. This balance, however, isn't particularly pleasing to producers who are hoping for a significant price surge. As per data from the U.S. Energy Information Administration (EIA), the commercial reserves of crude oil and refined products in the advanced economies of the OECD stood at approximately 2,842 million barrels at May's end. This figure was only marginally lower, by 35 million barrels, than the average of the preceding decade. Consequently, spot prices and calendar spreads have also hovered around average levels. The future, though, remains uncertain. Factors such as production cuts by Saudi Arabia and its OPEC+ allies, and a decrease in oil and gas rig counts in the U.S., are likely to reduce inventories in late 2023 and 2024. However, this could be counterbalanced by high exports from Russia, Venezuela, and Iran, rising interest rates, economic slowdown in North America and Europe, and a slow recovery in China post-pandemic. Thus, the market seems to be in a state of equilibrium, with the outlook being either optimistic or pessimistic, depending on one's viewpoint.
Gold
Gold saw a massive scare this past week mainly due to the fact that hawkish monetary policy intentions were retained throughout the world recently. As interest rates have risen, the value of currencies has gone up, which has put the demand for gold down. As rate hikes continue, gold will stay down.
Crypto:
BTC -30,422, 0.50% ETH - 1,928, 3.71%
BTC Graph (5-day)
Coinbase’s chief legal officer stated that Americans have continued to show a desire for regulated Bitcoin ETFs. Lots of people are entering the still relatively new world of cryptocurrencies, and a way to get even more people to enter this world would be through stable ETFs. If this is made a popular reality, this can further revolutionize crypto trading.
Europe:
Stoxx 600- 461.93, 1.94% DAX -16,147, 2.01% FTSE 100 -7,531, 0.93%
DAX Chart (5-day)
The ECB and its policymakers feel that have been put in a conundrum as EuroZone inflation is proving to be “stickier” than anticipated. Despite constant rate hikes, inflation, especially core inflation, is persistent. The immediate response would be to continue to hike rates, but policymakers feel they are already “near the top of the ladder.” They can only hike rates so much before seriously inflicting damage upon the economy, and this is why they are put in such a conundrum.
Asia:
XJO (Australia)-7,203, 1.47% Shanghai 180 Index-8,116, -0.61% Nikkei 225- 33,189, 1.24%
XJO Chart (5-day)
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