Markets Update - 5/3/24
Update on US equity and bond markets, US economic reports, the Fed, and select commodities with charts!
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Link to posts - Neil Sethi (@neilksethi) / X (twitter.com)
US equities finished a roller coaster week with the best day in nearly 3 months after a “Goldilocks” (as far as the Fed is concerned) jobs report which showed slowing but still positive job growth paired with a mild rise in the unemployment rate and softening in wages and the workweek. The ISM services PMI falling into contraction for the first time in 16mths added to the slowing economy vibe. Expectations for FOMC rate cuts increased, bond yields fell, and stocks jumped as a result (first 1% gain for the SPX on a jobs day since Nov ‘22). The dollar fell, but gold was unable to take advantage ending flat while crude continued to fall capping off its worst week since February. Bitcoin though bounced back over $62k.
“It’s really eased investors’ fears that the economy may be overheating or reaccelerating, and it’s reviving hope for rate cuts,” said John Hancock Investment Management’s co-chief investment strategist Emily Roland. “That’s why rates are falling, bonds are rallying and equity markets are up. Bad news for the jobs market, means the Fed may be able to start cutting later this year.”
“The payroll miss hands the baton to the bulls,” said Jose Torres at Interactive Brokers. “Markets are rallying aggressively as incoming data point to a shorter journey across the monetary-policy bridge.”
“This is the jobs report the Fed would have scripted,” Seema Shah at Principal Asset Management noted. “Of course, today’s weaker numbers need to mark the start of a new slower trend for multiple rate cuts to seriously be back on the agenda - but, by then, the new fear could be a slowing economy.”
“Today’s jobs report is the definition of Goldilocks: job growth that is gradually moving back to around trend amid a normalization of wage growth,” said Gennadiy Goldberg at TD Securities “This is certainly the type of employment report that Fed officials will welcome. We remain optimistic that the Fed will first ease rates at its September FOMC meeting.”
“Today’s jobs report is the definition of Goldilocks: job growth that is gradually moving back to around trend amid a normalization of wage growth,” said Gennadiy Goldberg at TD Securities “This is certainly the type of employment report that Fed officials will welcome. We remain optimistic that the Fed will first ease rates at its September FOMC meeting.”
While Fed officials will likely be relieved that the labor market is cooling, this report is not soft enough to change the Fed outlook, according to Tiffany Wilding at Pacific Investment Management Co. “Hiring was strong, unemployment remains low, and wages are likely to tick up again next month,” she noted.
The Nasdaq Composite was +2.0% (and the top 100 Nasdaq stocks (NDX) +2.0%), the SOX semiconductor index +2.4%, the market-cap weighted S&P 500 +1.3%, the equal weighted S&P 500 index (SPXEW) +0.7%, and the Russell 2000 +1.0%.
The Morningstar style box consistent with every style up but large growth shares outperforming.
Corporate news was a little lighter, in line with a Friday. Apple (AAPL 183.38, +10.35, +6.0%) was a big help after its better than feared earnings and $110 billion share repurchase program. Amgen (AMGN 311.29, +32.90, +11.8%) was another influential winner after a well-received earnings report and a positive trial update for its weight loss drug MariTide. Meanwhile, Expedia (EXPE 115.33, -20.76, -15.3%), Fortinet (FTNT 58.88, -6.32, -9.7%), Ingersoll-Rand (IR 86.72, -6.13, -6.6%), and DaVita (DVA 134.45, -7.79, -5.5%) logged sizable declines after reporting earnings.
And other corporate news from BBG:
And here were some SPX stocks highlighted by CNBC at mid-day.
A lot of US economic data again on Friday with the highlight of course that weaker than expected employment report which showed a lot of underlying softness beyond the miss in payrolls (household report showed no job gains (pushing the unemployment rate up), workweek fell, wages decelerated, and hiring outside of health care hiring was weak). As noted the ISM services PMI fell into contraction while the S&P version decelerated for a 3rd month.
See the Link to posts - Neil Sethi (@neilksethi) / X (twitter.com) for more details.
The SPX was able to get over the downtrend line from the April 1st high but not the 50-DMA (purple line). Positively, though, the daily MACD crossed back over to "cover shorts" and the RSI moved back over 50 to a 3-week high, so maybe it gets over next week?
The Nasdaq Composite chart looks even better jumping over the 50-DMA and seeing similar trends with its MACD and RSI. If RSI can break that downtrend line it would be even better.
RUT similar to the Nasdaq.
SPX sector breadth similar to Thursday with 10 of 11 sectors finishing green (Friday it was energy down around -0.1% (Thursday was health care)) with 9 sectors up at least a half percent & 3 up over 1% (4 yesterday). Growth led again.
Stock-by-stock SPX chart from Finviz.
Positive volume ok but not great at 68% NYSE, 73% Nasdaq. That’s worse than Thursday for the NYSE and about the same for the Nasdaq despite both having better index performances. Issues were 74 and 65%. New highs-new lows though improved to the best in three weeks.
Treasury yields fell to 3wk lows. The 10-yr note was down 7 basis points to 4.50%, 23 basis points off the high from last week, the 2-yr note was down 7 basis points to 4.81%, down 24 basis points off the high last week, while the 30-yr bond yield was down 6 basis points at 4.66% down 19 basis points from the high last week (but still up 32 basis points from April 1st).
Fed rate cut expectations continued to recover. A cut by July is up to 37%, by Sept to 68%, and by November 80%. There’s now 44bps of cuts priced for this year (from 26 on Tuesday), so now closer to two with just a 9% chance of no cuts this year (down from 27% Tuesday).
Link to posts - Neil Sethi (@neilksethi) / X (twitter.com)
The dollar fell out of its bull flag formation and made it all the way to the 50-DMA (purple line) before bouncing. Daily technicals remain negative though.
VIX drops sharply blowing through its uptrend line.
WTI capped off its worst week since Feb falling to nearly 2mth lows as systematic selling has likely kicked in. Daily technicals remain negative although it’s now the most oversold since last December.
Gold unable to make progress despite drops in rates and the dollar as it continues to respect that downtrend line. Daily technicals remain negative but not oversold so I still think a pullback to the $2250 level where the 50-DMA resides (purple line) seems likely.
Copper bounced but like gold just to the underside of resistance, although this resistance is not as strong as gold’s. That said its daily technicals have now rolled over so it has clearly lost its momentum. As I said Tuesday, after being the most overbought since Feb ‘21, it could require a couple of weeks or more of consolidation.
Nat gas continued to climb making it up to the key $2.16 level, a 3mth high and, more importantly, the bottom of a big gap from its drop at the end of January. If it can edge over $2.17 it could quickly run to the $2.40-2.60 area. Daily technicals are supportive as well.
No full Week Ahead this week, but I’ll try to put something out on the week’s events on Sunday.
Link to today’s posts - Neil Sethi (@neilksethi) / X (twitter.com)
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