What happened this week
The East coast had a very unexpected week, on Friday morning a 4.8 magnitude earthquake occurred along a fault line in New Jersey, this was the strongest earthquake in NJ in over 200 years. There were no reports of significant damage, thankfully. Today we await a full solar eclipse, this a rare phenomenon, the last one occurring in 2017 for part of Central United States.
Gold looks ‘very vulnerable’ to a setback, veteran advisor says, after prices hit record high: Whilst we have continued to see new record highs in the stock markets, Gold (the “recession hedge”) has also continued to rise. Analysts comment this could be due to a longer term underperformance of the precious metal versus equity markets, whilst others speculate the rise in prices could be due to an underlying move by central banks (particularly Asian) to increase their asset allocation and gold reserves.
https://www.cnbc.com/2024/04/08/gold-prices-look-very-vulnerable-to-a-setback-strategist-says.html
Yellen says she won’t rule out possible tariffs on China’s green exports: The US has been expressing concerns about the oversupply of green energy exports, such as solar power, electric vehicles and lithium-ion batteries. Yellen spoke about how the US would like to work with China but is considering all measures including imposing tariffs to protect domestic industries.
Apple laying off 614 California workers after scrapping electric car project: Apple is laying off 614 workers after they have decided to abandon their efforts to build an electric car.
Surge in US small businesses started as side hustles: The number of new small businesses launched last year almost doubled those of 2022, analysts contribute this surge to the new hybrid/remote work style.
https://www.foxbusiness.com/economy/surge-small-businesses-started-side-hustles
Looking ahead to the rest of the week:
Wed April 10th: US Consumer Price Index
Wholesale Inventories
Thurs April 11th: Initial Jobless Claims
Producer Price Index
What happened this week
This morning all indices opened higher as the US consolidated its two presidential candidates after the results of Super Tuesday came in. Republican candidate Nikki Haley ended her presidential campaign ceding the GOP nomination to Donald Trump after losing every state except Vermont to Trump.
Microsoft launched a an AI tool last year and one of the company’s engineers came out speaking urgently about the disturbing findings he came across while test the AI tool at the end of last year. Jones raised concerns within the company and more publicly writing a letter to board members and also to US Senators. Jones cites concerns that the AI generator creates violent, sexual images and ignores copyrights. Most alarming is these images are create without any indication in the prompt. CNBC independently investigated and found, "The term “car accident,” with no other prompting, generated images of sexualized women next to violent depictions of car crashes, including one wearing lingerie and kneeling by a wrecked vehicle in lingerie and others of women in revealing clothing sitting atop beat-up cars.”
Concerns over AI deep-fake possibilities continue to grow, especially in the US election year as analysts fear an unprecedented amount of AI-generated election-related misinformation.
Private payrolls rose 140,000 for the month, up from the January numbers but missing the 150,000 estimate. Jerome Powell stated that he believes that if the economy continues on the current path, with job creation, inflation lowering etc he hopes that the US will begin to see interest rates come down.
Looking ahead to the rest of this week and into next:
Thurs March 7: Initial Jobless claims
US Productivity
Fri March 8: US Non farm payrolls
US Unemployment rate
Our March 12: Consumer Price Index
What happened this week
December capped off an incredible year end rally for the US equity markets. Throughout the month investors who had previously failed to commit, holding cash on the sidelines, rushed into the markets in a “FOMO” (Fear Of Missing Out) surge of new buying.
Comments from the Federal Reserve convinced markets that the inflation battle may have been won, and futures markets reflected hope that interest rate increases were ending, and the stage set for rate cuts hoped for in the run up to the November elections. Strong employment statistics and retail consumption through the holidays showed the US economy's resilience while Inflation and energy prices softened.
As we look to 2024, we believe that interest rates will stay steady, with no significant decline in the short or medium term. In fact, we may be in a short term high for Yields on longer-term government debt. We still see a flat-ish yield curve, possibly turning positive as the year progresses.
Equity markets may find this situation disappointing, and the chance for increased volatility and a series of up/down moves ahead of the elections will make equity markets risky.
The stock markets have continued to climb to new high in recent days, the S&P 500 entering into bull market territory; having risen more than 20% since its previous lower and as of Friday passing its previous high.
Tech stocks make up 28.9% of the index and it is this sector that is largely driving up the index to new highs. Apple, Microsoft and Amazon all up between 3-6% in the past five days, most surprisingly is Apple’s rally following three consecutive downgrades in the first week of January. Market analysts suspect a surge in trading from AI, non-discretionary buyers and tech sector momentum is continuing to drive Apple higher.
Across the US the presidential race is in full swing, Tuesday all eyes are on New Hampshire as Trump is aiming to drive his last remaining rival, Nikki Haley, to secure for himself the GOP nomination.
What happened this week
This weekend the Palestinian militant group, Hamas, launched an attack against Israel. There have been over 1,500 deaths recorded and many more injured. President Biden is expected to speak today on the unprecedented terror attacks and subsequent unfolding war.
Markets opened after the long weekend slightly higher, boosted by a drop in Treasury yields as investors sought a safe-haven whilst assessing the geo-political risks of the Israel-Hamas war. The US 10yr Treasury was down 8 bps to 4.694%.
Investors are waiting more quarterly results in the coming week; hoping for more insight ion company profit margins, consumer spending, inflation and the potential for continued high interest rates. Here’s who to look out for this week:
Tues: PepsiCo, Neogen Corp
Wed: Loop Industries, Wipro Limited, Samsung
Thurs: Delta Airlines, Infosys, Domino’s Pizza, Walgreens
Fri: JPM, PNC Financial Services, Citigroup, BlackRock, Wells Fargo, UnitedHealth Group
Samsung releases results on Wednesday and is expected to show a third quarter profit down 80% from a year earlier as the global chip manufacturer cites high inventory, low demand and rock-bottom prices for memory chips as the cause and expects to rebound as they have reduced inventory significantly.
Other economic data on the calendar for this week:
Tues: Wholesale Inventories
Wed: Core PPI, Minute of Fed’s September FOMC Meeting
Thurs: CPI, Initial Jobless Claims
Fri: Import Home Index, Consumer Sentiment
What happened this week
As we await market open in this last week of August, several companies are making big moves in the premarket;
Xpeng: US traded shares of the Chinese electric car maker are up nearly 5% after the company announced it will buy Didi’s smart electric car business worth$744 million.
Also Chinese stocks Alibaba and JD.com are up in the premarket after Chinese authorities said it would reduce a tax on trading to boost the stock market.
3M: is up 5% in early trading after Bloomberg announced that they tentatively resolved over 300,000 lawsuits related to their faulty earplugs, the company will pay more than $5.5 billion in settlements.
Boston Scientific is up 5.5% after Sunday the company announced positive results for a treatment for patients with atrial fibrillation.
The technology sector is in focus this morning, leading gains recovering from its poor performance up until now this year. Tesla is up 2.1% in premarket trading and chipmaker Nvidia is leading the charge after releasing a knock out earnings report.
Last Friday Fed Chair Jerome Powell spoke an encouraging tone at the annual central bank conference in Wyoming; he "pointed to some signs of continued economic growth and strong consumer spending, but indicated that the central bank would “proceed carefully” with additional hikes.” As of Monday morning, the markets seem to be pricing in a 20% chance that the Fed will again raise rates in their September meeting.
Looking ahead to this week:
Mon Aug 28th:
U.S. Commerce Secretary Gina Raimondo is visiting Shanghai and Beijing to discuss business relations between the U.S. and China; companies such as Intel have been competing for semiconductor dominance moving to make more chips domestically.
Tues Aug 29th:
9am: S&P Case-Shiller home price index
10am: July Job Openings
Consumer Confidence
Wed Aug 30th:
8:30am: GDP Q2 revision
US Trade Balance in goods
Retail inventories
Thurs Aug 31st:
8:30am Initial Jobless Claims
Personal Spending
PCE Index
Fri Sept 1st:
8:30am: US nonfarm payrolls
US unemployment rate
10am: ISM manufacturing
Construction Spending
What happened this week
Last Tuesday, Fitch officially announced that is was downgrading the United States’ long-term foreign currency issuer default rating from ‘AAA’ to ‘AA+’. The agency cited concerns of expected fiscal deterioration, rising deficits, and tightening by the Federal Reserve. US Treasury Secretary Janet Yellen, pushed back against the downgraded saying; "I strongly disagree with Fitch Ratings’ decision," Yellen's statement said. "The change by Fitch Ratings announced today is arbitrary and based on outdated data." "Fitch’s quantitative ratings model declined markedly between 2018 and 2020 – and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision," she continued. "Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness.”
The US housing market affordability is at a record all time low, a report released by Redfin last Friday showed that the median home mortgage payment hit $2,605 in July, up 19% from a year ago. Thirty-seven states now require at least 30% of median annual income for new home payments. Experts in the housing sector cite the problem is primarily a supply issue not a demand issue, normally when interest rates areas high as they are buyer shy away and subsequently housing prices drop to compensate for the expensive interest rates, but not in the market.
Looking ahead to this week:
Mon Aug 7th: Tyson Food reports quarterly earnings
Tues Aug 8th: Duke Energy, Rivian, Lyft and UPS 9expected good earning after teaming up with Teamsters last month in a $30 billion contract)
Wed Aug 9th: Disney to report
Thurs Aug 10th: The Consumer Price Index for July is expected to show inflation moderating, with core inflation holding at 4.8%
Fri Aug 11th: The Producer Price Index is expected to rise 0.7% above the prior months 0.1%.
What happened this week
Minneapolis Fed President Neel Kashkari said on Monday that he cautioned against reading too much into a June pause in the current rate-hiking cycle.Markets currently are putting about an 83% probability that the FOMC will hold off on the 11th consecutive increase, the committee is set to meet June 13-14. “If we were to skip in June, that does not mean we’re done with our tightening cycle. It means to me we’re getting more information,” he said.
The world’s largest seven economies are meeting at a summit in Japan to discuss how to de-risk and diversify their supply chains away from China. De-risking refers to easing some of the dependencies on China, rather than totally breaking the relationship. Since the Corona virus pandemic and more recently the Ukrainian war there has been growing concern amongst western countries of economic coercion and intricacies of the supply chain reliance on China. The overall message from the summit sought to stress a De-risking strategy rather than a De-coupling; citing that isolating China would be impossible and dangerous.
JPMorgan this morning raised its net interest income by $7 billion this morning in an all-day investor presentation, following this announcement the spurred the financial’s highest earnings day stock bump in 20 years. JP Morgan emerged as one of the largest beneficiaries of the recent regional banking crisis; it was one of the only institutions which saw deposits rise as panicked investors looked for security in larger banks. Shares are up 1.3% on market open.
Apple shares fell on market open after being downgraded from, buy to hold by Loop Capital, who said Monday it expects Apple to fall short of June revenue expectations.
Meta has been fined a record 1.2 billion euros by European privacy regulators over the transfer of EU user data to the US. Meta used a mechanism called standard contractual clauses to transfer personal data in and out of the EU. Meta is contesting the fine.