Hey Folks, this coming week will be a very important one for the markets. The Feds will give us their Quarterly Dot Plot which is a projection of where they see interest rates going over the next 12 months. This will go a long way as to helping the markets see what and how the Feds view the current market environment. We could see market price action move a good deal if we get a surprise. Get my take on the current markets in this week’s market round-up.
MARKET SOUND BITES:
Major indexes ended higher except for Small Caps on the Russell which moved back into the Red YTD. Some of the steam seemed to come out of the AI sector, as news showed the US Gov slowed the issuing of licenses to chipmakers for AI chip sales to the Middle East and were opening antitrust investigations into Microsoft and NVIDIA over their dominance of AI.
This past week showed some conflicting Economic data. The start of the week brought some downbeat economic readings, which appeared to lead to a return of worries about slowing growth alongside high inflation—or “stagflation”—among some investors. Specifically, the Institute for Supply Management (ISM) reported that its gauge of manufacturing activity had fallen further into contraction territory (48.7, with levels below 50.0 indicating contraction) and on Tuesday the Labor Department reported that job openings in April had fallen to their lowest level (8.059 million) since February 2022. Conversely, the number of Americans leaving their jobs voluntarily, the so-called quits rate—considered by many as a more reliable indicator of the strength of the labor market—surprised on the upside. The ISM’s services jumped to 53.8 in May, its highest level in nine months and well above consensus expectations. And on Friday’s monthly Job’s data employers added 272,000 jobs in May, well above consensus expectations and the most since the start of the year. The market’s reaction to the news may have been tempered by an unexpected rise in the unemployment rate to 4.0%, its highest level since January 2022. Even as the unemployment rate increased, average hourly earnings rose 0.4%, above consensus and the most since January. Even though the 10 Year yields moved higher after the Jobs data, for the week they ended lower on signs of easing inflation.
In Europe the ECB reduced its deposit rate by a quarter point to 3.75%, as expected, but it stopped short of indicating that more cuts could follow. Their forecast also shows inflation would average 2.5% in 2024, an upward revision from the previous estimate of 2.3%. They also revised its estimate of average inflation for 2025 to 2.2% in 2025 from 2.0% but held its forecast for 2026 at 1.9%.
In Japan the latest purchasing managers’ index data showing that the country’s services sector continued to expand at a sharp pace in May lent support to sentiment. There were also some signs that private consumption could stop being a drag on growth, as household spending increased year on year in April, the first increase in 14 months. The BoJ is widely expected to keep interest rates unchanged at its June meeting and it is likely to keep taking incremental tightening steps, given improving global growth and Japan’s inflation trends.
And in China, we saw the value of new home sales by the country’s top 100 developers rose 11.5% in May, up from April’s 3.4% increase, according to the China Real Estate Information Corp. New home sales slumped 33.6% in May from a year ago but eased from April’s 45% decline. The data boosted hopes that China’s property market downturn, now in its fourth year, may start to recover after Beijing announced a rescue package in May to stabilize the struggling sector. China’s exports rose a better-than-expected 7.6% in May from a year earlier, up from 1.5% growth in April. Imports increased a weaker-than-expected 1.8% in May, slowing from April’s 8.4% rise.
Enjoy this week’s round-up.
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Trade Smart !
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