Hey everyone, on this long holiday weekend here in the US it is a great way to start with a very strong bullish week in price action. Can these markets move higher? Get my take here in this Holiday Weekend update.
WEEKLY SOUND BITES:
The major indexes all moved higher by more than 6% this past week with every sector in the S&P moving higher. The Dow broke an 8-week losing steak that goes back to the early 1930s and the S&P and NASDAQ broke a 7-week losing streak the moves higher this week.
Inflationary pressures contributed to some softening in early readings for U.S. PMIs receding to 57.5 in May, down from 59.2 in April. Manufacturing output and new orders were strong, but the survey indicated that input costs and output charges also increased meaningfully. On the services side of the economy, the flash PMI reading came in at 53.5, down from 55.6 in the preceding month. New sales growth slowed, while input costs increased to the highest level on record. April data from the Census Bureau showed that core durable goods orders, which exclude transportation, likewise grew 0.3%. This print was below expectations.
The Fed Meeting Minutes contained few surprises, with all members voicing support for 50-basis-point rate increases over the next few meetings but then a possible softening the remaining meetings for the year. Upon that news price action reacted by showing very strong bullish signs as the markets went into a long holiday weekend. The core personal consumption expenditures price index, which excludes food and energy, ticked up 0.3% in April, in line with expectations and little changed from the preceding three months. On an annual basis, this inflation metric came in at 4.9%, a moderation from March’s 5.2% reading. As a result of this bullish price action, the 10-Year Treasury Yield traded lower, as the market appeared to focus on signs of slowing growth in the economy that could lead to a slower pace of Federal Reserve rate hikes.
The ECB President “Queen Bee” Lagarde appeared to side with hawkish colleagues confirming an early end to the ECB’s bond-buying program in the third quarter and making her first explicit call for interest rate increases. Meanwhile, Eurozone business activity held up better than feared in May with the Composite PMI, a monthly gauge of the services and manufacturing industries, dipping to 54.9 from 55.8 in May. The U.K. PMI came close to stagnating in May with the index coming in at 51.8 in May—a 15-month low that was down from 58.2 in April.
A further surge in coronavirus cases in Beijing ignited fears of an economic slowdown amid supply chain concerns. Worries about tightening global financial conditions and the potential impact on economic growth similarly weighed on Japanese sentiment. Optimistic retail earnings outlooks and waning concerns about overly aggressive interest rate hikes by the U.S. Federal Reserve put investors in a buying mood.
Chinese markets weakened amid concerns over slowing growth exacerbated by the government’s zero-tolerance approach to the coronavirus. Shanghai, which has been under lockdown since late March, is gradually easing restrictions as officials have started allowing more people out of their homes and businesses to reopen.
Enjoy this week’s Market Round-Up
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