Market Synopsis: Equities Up, Treasury Yields up, Commodities mixed, Dollar down, Crypto Mixed
Past Week Events:
This Week's Events:
Consumer Attitudes Drop with the Present Situation's Unfavourable Outlook: The Consumer Confidence Index, which tracks consumer confidence in the economy, dropped in May, going from 92.3 in April to 85.5. The increasingly pessimistic appraisal of the status of the economy and the employment market was largely responsible for this negative trend. Consumers are feeling the consequences of inflation as they worry about the growing cost of goods. The American economy depends heavily on consumer spending, which might be impacted by this mentality.
ADP Report Indicates Robust Job Growth and Varied Sector Performance in May: With 978,000 new positions added, the ADP National Employment Report for May revealed a significant increase in private sector employment. The performance across sectors was similarly variable. The sector that provides services, which includes companies like retail, finance, and healthcare, accounted for 850,000 of these jobs. The goods-producing sector, which includes the manufacturing and construction industries, expanded and added 128,000 jobs. A variety of performance in many different areas was noted by the study. The leisure and hospitality sector, which was severely impacted by the outbreak, was primarily responsible for the job increase.
Manufacturing PMI to reach 46.9 in May 2023: The Manufacturing Purchasing Managers' Index (PMI), which gauges the economic health of the manufacturing sector, fell to 46.9 in May. This suggests that the economy is slowing down and that manufacturing is contracting, indicating a drop in consumer demand for manufactured products. The primary factors for the slump were a decline in output and new orders. The research also placed focus on worries about supply-chain disruptions and manpower shortages that may negatively affect the industrial sector.
Employers continued to add 339,000 new positions in May, sustaining their rapid expansion. Despite Challenges Employers created 339,000 new jobs in May, suggesting consistent growth in the labour market that prevents a recession in the nation. However, the unemployment rate increased at one of the quickest rates since the epidemic started, going from 3.4% to 3.7%. Layoffs or the cessation of temporary employment contributed to the majority of this rise; the IT industry was particularly negatively affected.
S&P U.S services PMI will be reported next week on Monday. This indicator reports what trend a certain sector is headed in, and in this case it is the services sector. A report over 50 indicates growth in the sector, and a report below fifty indicates a contrast. The previous report was 55.1, and the upcoming report is forecasted to stay at this level at 55.1.
Factory orders also come out next week. Factory orders illustrate the change in factory orders manufacturers are making, and when there is a positive growth that means manufacturers are ordering more because there is more demand in the economy which means the economy is growing. Vice versa, if factory orders decline that means the economy is slowing down. The last report came out as 0.9% indicating growth, and the next report is forecasted to come out as 0.6% also indicating growth.
Market Snapshot:
In the past week, U.S. equity markets exhibited robust performance, largely catalyzed by favorable jobs data and the anticipation of China injecting further stimulus into its beleaguered real estate sector. Small Cap stocks, a segment often seen as a barometer of domestic economic health, rebounded impressively from a mid-week trough to close 3% higher on Friday. This performance was in large part due the strong jobs report which showed that 339,000 jobs were added in May. The U.S. dollar, however, registered a slight decline. Cryptocurrencies presented a mixed bag, with Bitcoin hovering around the $27,000 mark, while alternative digital currencies experienced notable gains. Commodities also demonstrated varied performance, with oil prices initially falling but subsequently recovering to $72 by week's end. Despite the market's hawkish anticipation of higher interest rates since the onset of May, technology stocks have paradoxically soared, a decoupling that has market observers questioning the sustainability of this trend.
Quip of the Week: "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."- Warren Buffet
U.S Equities:
Indexes(Week)
SPX 4,282.37(1.83%), DJIA 33,762.76(2.02%),
NASDAQ 13,240.77(2.04%), RUT 1,830.91(3.26%)
Sectors
This week, every sector was able to close in the green. Consumer discretionary was the top performer rising almost 6 percent. On the other end of the spectrum, Consumer staples was the laggard but still ending in the green.
Treasuries:
Treasury Yields were all lower on the week. Yields fell all the way into the end of the week until Friday's jobs report. Yields experienced a significant jump on Friday following the release of stronger-than-expected payroll data. The yield on the 10-year Treasury rose by 9 basis points to 3.698%, while the 2-year Treasury yield saw an even larger increase, rising by around 16 basis points to 4.503%.
Commodities:
Oil
Following Congress's approval of a debt ceiling agreement that prevented a government default in the world's largest oil consumer, oil prices significantly increased by more than 2% on Friday. Hopes for a potential pause in interest rate hikes were also boosted by the encouraging jobs data. U.S. West Texas Intermediate (WTI) crude increased 2.34% to $71.74 while Brent futures settled up 2.49% to $76.13 per barrel. However, both contracts experienced their first 1% or more weekly losses in three weeks. Traders are speculating on the possibility of additional output cuts as the market concentrates on the upcoming meeting of OPEC and its allies.
Gold
Gold was flat on the week just under 2,000$ an ounce. Congress's approval of a debt ceiling agreement that prevented a government default now has removed a major catalyst for Gold’s movement.
BTC -27,159, 1.52% ETH - 1,831.76, 1.05%
This week altcoins skyrocketed up with coins like Ripple up almost 12 percent. Interestingly, Bitcoin and Ethereum move very little on the week despite broader movements in the crypto market.
Europe:
Stoxx 600- 462.15, 0.16% DAX -16,051, 0.42% FTSE 100 -7,607, -0.26%
Chart of the DAX (5-day)
Talks of Hungary using the Euro are being postponed as many believe the Hungarian economy is not ready. The economy is not nearly as developed as some of the European powers in the Eurozone, and they believe that they will be ready to use the Euro once their economy reaches 90% of what the development in other countries are. They believe Hungary will be able to achieve this goal by around 2030.
Asia:
XJO (Australia)-7,145, -0.13% Shanghai 180 Index-8,241, 0.04% Nikkei 225- 31,524, 1.97%
XJO 5-day Chart
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