During week 15, trading was primarily driven by technical factors. NASDAQ ranged (o:12108, c:12072) between 12245 and 11986, while BTC corrected down by 7.6 percent from its 10-month high. On the macroeconomic side, we saw an unexpected surge in the Global Manufacturing PMI, and the “Beige Book” reported “somewhat moderated” employment growth, contributing to market volatility.
Notable Macroeconomic Updates:
- S&P Global Manufacturing PMI Flash (April): 50.4 (fact), 49 (consensus), 49.2 (previous);
- China GDP Yearly Growth Rate (Q1): 4.5 percent (fact), 4 (consensus), 2.9 (previous);
- NY Empire State Manufacturing Index (April): 10.8 (fact), -18 (consensus), -24.6 (previous);
- NAHB Housing Market Index (April): 45 (fact), without change (consensus), 44 (previous);
- Building Permits (March): 1.413M (fact), 1.45M (consensus), 1.55M (previous);
- Initial Jobless Claims (April/15): 245K (fact), same (consensus), 240K (previous);
- Philadelphia Fed Manufacturing Index (April): -31.3 (fact), -19.2 (consensus), -23.2 (previous).
On Monday, the NY Fed reported that new orders and shipments had surged in the state, bringing April’s Empire State Manufacturing Index to its five-month high of +10.8. The previous reading was -24.6, while most economists had projected -16. Meanwhile, short-term Treasuries continued to climb higher, with 3-month Bills yielding 5.19 percent, while 6-months settled on 4.87, indicating traders’ more positive expectations towards the depth and length of the upcoming recession. However, that had already been priced in by the markets, and the NASDAQ reacted by sluggishly adding 0.4 percent to its morning opening (o: 12108, c: 12157), while BTC just ranged (o: 29529, c: 29467).
On Tuesday, the Census Bureau announced that building permits for March had dropped by 8.8 percent to 1.413 million, which was more than the anticipated decrease of only 6 percent, according to economists. Additionally, the Bureau of Statistics of China reported that the national economy had grown by 4.5 percent in Q1, compared to 2.9 percent in Q4 and market estimates of 4.0 percent, due to a surge in retail sales. This was the best performance since Q1 of 2022.
Although many analysts question the reliability of China’s government statistics, it still contributes to the basket of macroeconomic positives. Nevertheless, markets dismissed all of this as old news and continued to focus on technical indicators, with NASDAQ (o:12234, c:12153) retreating slightly from a strong resistance zone at 12200–12300, and BTC (o:30303, c:30221) consolidating.
On Wednesday, major stock indexes corrected downwards on technicals during pre-market trading and then resurged on corporate reporting during the regular trading session. As a result, the NASDAQ (o:12063, c:12157) remained at its Tuesday closing price, while BTC (o:29218, c:29227) slid down to the 28.5K support level in after-hours trading.
On the corporate side, Abbott reported earnings per share (EPS) of 1.03 (consensus: 0.99, previous: 1.73) and increased 7.82 percent since the previous session, while Morgan Stanley reported EPS of 1.70 (consensus: 1.67, previous: 2.06) and increased 0.67 percent. Another banking stock seeing higher highs was US Bancorp, which increased 2.33 percent.
On the macroeconomic side, the Fed published its “Beige Book,” which is a report issued eight times a year by the Fed Board approximately two weeks before each FOMC meeting. The Beige Book provides an overview of current economic conditions across the twelve Fed districts, namely: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
The recent Beige Book stated that overall economic conditions remained stable in the past few weeks, with “employment growth moderated somewhat” and “the rate of price increases appearing to slow.” Two districts — Philadelphia and Richmond — reported contracting economic activity, while Atlanta, Minneapolis, Dallas, and San Francisco reported it slightly expanding.
In the 12th (San Francisco) District, labor market conditions remained tight overall despite softening in some sectors such as financial services and technology. Price levels rose during the reporting period, though at a somewhat slower pace. It was also noted that the recent flooding in the state led to supply disruptions and contributed to rising input costs, such as transportation, food, some construction materials, and insurance. However, it was emphasized that conditions in the residential real estate sector worsened and lending activity fell significantly in recent weeks amid higher interest rates and elevated uncertainty in the banking sector.
Overall, due to a slight slowdown in the pace of inflation, as well as tightening of lending conditions contributing to a decreasing money supply, the FOMC might consider taking a pause in its rate-hiking program. However, in my opinion, Powell’s own political considerations, as well as bureaucratic inertia, will allow him to stick to his “strategy” and hike rates by another 0.25 points.
On Thursday, the Philadelphia Fed Manufacturing Index for April was released, showing a significant decline to -31.3 (previous: -23.2), which was well below the expected value of -19.2. In addition, the number of unemployment benefit claims increased to 245K, surpassing market expectations of 240K and nearly reaching the 12-month high of 247K. Despite these developments, the NASDAQ (opening: 12039, closing: 12059) managed to close in the green as traders continued to focus on technical analysis, particularly with respect to major resistance levels. Meanwhile, BTC (opening: 28892, closing: 28104) experienced a more substantial correction, subtracting 2.7 percent from its opening price during the daily session.
The most recent report on Philadelphia’s businesses (the Philadelphia Business Outlook Survey) revealed that regional manufacturing activity continued to experience a downturn this month. The indicators for current activity, new orders, and shipments all remained in the negative territory. Despite this, employment levels held steady overall, while price indexes continued to decrease. Looking forward, future indicators suggest that firms remain restrained in their growth expectations for the next six months. More than 32 percent of firms anticipate a decline in future activity, which is an increase from 29 percent last month. In contrast, 31 percent of firms predict growth, which is up from 21 percent. Meanwhile, 34 percent of firms anticipate no change in future activity.
On Friday, the PMI Composite Output Index rose, indicating a revival of business activity in April, with the service sector displaying the best performance. It was added by positive corporate reports and surging stocks, such as Procter & Gamble, which increased by 3.46 percent, and SAP, which added 5.24 percent. However, with the FOMC meeting looming in two weeks, traders had a mixed reaction, resulting in NASDAQ (o:12046, c:12072) ranging between an highest price of 12097 and a lowest one of 11986, while BTC (o:28218, c:27279) subsided by 3.3 percent during the daily session.
The April reading of the S&P Global Flash US PMI Composite Output Index posted 53.5, surpassing March’s figure of 52.3. This indicates a notable acceleration in business activity, marking the most rapid increase since May 2022. The upswing in output marks the third consecutive increase in as many months. Notably, the swifter rise in activity was all-encompassing, with service sector companies displaying the steepest growth rate. In April, new orders at US firms also experienced a significant upturn, with the sharpest increase recorded in the past 11 months.
In week 16, traders anticipate data on March’s Durable Goods (previous: down 1 percent, consensus: up 1 percent), GDP Growth Rate (previous: 2.6 percent, consensus: 2.9), and March’s Core PCE Price Index (previous: up 0.3 percent, consensus: up 0.2) on Friday. Traders are expected to pause with the FOMC meeting approaching, which may lead to further corrective actions on the market and continued volatility.
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