Hey everyone, very interesting price action towards the end of this week, primarily driven by comments by Fed Officials. Let’s get my take on the current market action in this week’s Round-Up.
WEEKLY SOUND BITES:
The major indexes ended lower on the week. The Russell 1000 Growth Index stocks gave up more ground than its value counterpart while the S&P 500 communication services sector pulled back the most with NFLX being the primary culprit having fallen over 35% for the week.
Preliminary data for the S&P Global U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, suggested that growth in business activity slowed in April but remained strong. The widely watched economic indicator came in at 55.1 compared with 57.7 in March. The S&P Global U.S. Services PMI hit 54.7 in April, down from 58.0 in March. The survey, however, showed that manufacturing activity expanded.
Fed policymakers strike a very hawkish tone in public comments this past week which was one of the primary culprits for driving price action much lower as we ended the trading week. Bullard indicated that a rate increase of as much as 75 basis points (0.75 percentage points) could be up for discussion while Fed Chair Jerome “Power Ranger Boom Boom” Powell said a 50-basis-point rate increase could be “on the table” for the May 3‒4 policy meeting and stated that “it is appropriate…to be moving a little more quickly.” This was all it took for the major indexes to sell off in rapid succession to end the trading week.
Speaking at the annual IMF/World Bank meeting, European Central Bank (ECB) President Christine Lagarde reiterated that its asset purchase program will conclude in the third quarter and that incoming data will determine interest rate moves. Business activity in the eurozone unexpectedly accelerated in April with the PMI climbing up to 55.8 in April from 54.9 in March, driven by quicker growth in the services sector as economies emerged from coronavirus lockdowns, according to a survey of purchasing managers. In the U.K. business activity grew at the slowest rate in three months in April, as record inflation pressures and the Ukraine conflict curtailed orders in the services sector with the PMI slipping to 57.6 from 60.9 in March.
In Japan the yen hovering around a two-decade low against the U.S. dollar and the BoJ Governor Kuroda indicating the negative effects of a weak currency, including the increased difficulty in companies’ business planning, need to be taken into account. In its April Economic Report, the Cabinet Office upgraded its assessment, stating that the Japanese economy is showing signs of picking up as the severe coronavirus situation is easing. April flash PMI data showed an expansion in services sector activity and a rise in output levels in the manufacturing sector.
Chinese markets continued to slide as investors worried about the economic fallout from coronavirus lockdowns after officials said tough restrictions would remain in place. China’s economy grew at a stronger-than-expected 4.8% pace in the year’s first quarter from a year ago, up from 4.0% in last year’s fourth quarter. On a quarter-on-quarter basis, the economy expanded 1.3% in the first three months of the year, slowing from the previous quarter’s 1.6% increase. But with the current lockdowns in place, the IMF cut China’s 2022 growth forecast to 4.4% from 4.8% in its latest outlook.
Enjoy This Week’s Round-Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
