Transcript

Dead Boogeyman? · ANGLES.

0:01
SPEAKER_00: Dead Boogeyman, my weekly market review, May 5th, 2024.
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SPEAKER_00: Last week saw a pretty dismal month of April finally come to an end,
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SPEAKER_00: with most indexes suffering a greater than 4% loss for the month,
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SPEAKER_00: the first monthly setback of the year.
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SPEAKER_00: But stocks enjoyed a second consecutive week of higher prices,
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SPEAKER_00: after a wild ride that navigated some big earnings report,
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SPEAKER_00: a Fed interest rate decision meeting,
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SPEAKER_00: and a jobs report.
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SPEAKER_00: The balls remained in the driver's seat from the previous week on Monday as the
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SPEAKER_00: recently shaky stock prices of Apple and Tesla continued their recent recoveries
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SPEAKER_00: and helped drag all the indexes modestly higher on the day,
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SPEAKER_00: taking the S&P 500 to its highest level for a couple of weeks ahead of a tsunami of
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SPEAKER_00: Q1 earnings reports.
0:53
SPEAKER_00: There was a tangible change in mood,
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SPEAKER_00: however,
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SPEAKER_00: on Tuesday as stocks seemed absolutely determined to move lower ahead of Jerome
1:01
SPEAKER_00: Powell's press conference the next day,
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SPEAKER_00: which suddenly had the feel of a big possible downside catalyst.
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SPEAKER_00: Any excuse would do.
1:11
SPEAKER_00: And when the normally overlooked data point of the Employment Cost Index came in a
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SPEAKER_00: tad hotter than expected and the very flawed statistic of consumer confidence came
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SPEAKER_00: in colder,
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SPEAKER_00: This was all that was needed to trigger a big spike in treasury yields and a major
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SPEAKER_00: sell-off in stocks that sent the indexes plunging.
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SPEAKER_00: Before markets opened on Wednesday,
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SPEAKER_00: Amazon came out with a very robust earnings report,
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SPEAKER_00: but Starbucks and CVS disappointed,
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SPEAKER_00: and their respective stock prices all responded accordingly.
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SPEAKER_00: The market in general,
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SPEAKER_00: however,
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SPEAKER_00: basically did nothing all morning,
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SPEAKER_00: holding its collective breath ahead of hearing from Powell and taking a largely as
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SPEAKER_00: expected job openings and labor turnover survey jolts report in its stride.
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SPEAKER_00: There was, of course, no change made to the Fed Fund's interest rates.
2:03
SPEAKER_00: Everyone knew that was going to be the case.
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SPEAKER_00: The press conference was interesting,
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SPEAKER_00: though,
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SPEAKER_00: as Powell skillfully threaded the needle,
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SPEAKER_00: remaining absolutely on message that there will be interest rates coming at some point.
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SPEAKER_00: It's just a matter of when.
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SPEAKER_00: While acknowledging that recent data had shown inflation stickiness to be a real
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SPEAKER_00: thing and that this was hampering the Fed's ability to cut interest rates right now,
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SPEAKER_00: he scornfully laughed off the idea that the next move would be to raise rates.
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SPEAKER_00: Stocks and bonds initially lapped this all up and indexes exploded higher and bond
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SPEAKER_00: yields fell hard as soon as Powell appeared to rule out the rate increase.
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SPEAKER_00: with the S&P 500 jumping 1.2% in a matter of minutes.
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SPEAKER_00: But stock prices then quickly reversed back lower to finish a smidge down on the day,
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SPEAKER_00: after seeming to recalibrate his message as actually having been,
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SPEAKER_00: OK,
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SPEAKER_00: we aren't about to raise interest rates,
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SPEAKER_00: but we are still a long way from having enough confidence that inflation is under
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SPEAKER_00: control to lower them any time soon.
3:09
SPEAKER_00: Wall Street's mood swung back to positive on Thursday and stocks rose nicely,
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SPEAKER_00: with the rate hike boogeyman apparently dead.
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SPEAKER_00: But there was little caution in the air,
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SPEAKER_00: as there were still plenty of wild cards to be negotiated before the relative
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SPEAKER_00: safety of the weekend,
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SPEAKER_00: with earnings from Apple after the bell and a big jobs report the next day.
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SPEAKER_00: The Apple's earning report,
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SPEAKER_00: the final one this season from one of the big guns,
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SPEAKER_00: showed continued sales declines around the world and ongoing challenging conditions
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SPEAKER_00: in China,
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SPEAKER_00: but nothing was as bad as feared.
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SPEAKER_00: This saw the stock price shoot higher in the aftermarket,
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SPEAKER_00: helped by the announcement of a dividend increase and the biggest stock buyback in history.
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SPEAKER_00: Pre-market on Friday,
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SPEAKER_00: we learned that from the jobs report,
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SPEAKER_00: the payrolls rose 175,000 in April,
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SPEAKER_00: somewhat below expectations,
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SPEAKER_00: but still very solid.
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SPEAKER_00: The unemployment rate was 3.9%, a fraction above both estimates and the previous month.
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SPEAKER_00: And importantly for inflation optimism,
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SPEAKER_00: wage growth rose only 0.2% month to month below the 0.3% prediction.
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SPEAKER_00: If Wall Street could have created a perfect jobs report in a laboratory, it would have looked like this.
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SPEAKER_00: Stocks screamed higher and treasury yields plummeted,
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SPEAKER_00: boosted by both the Apple data from the night before and the impeccable jobs report,
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SPEAKER_00: before taking something of a cold shower around lunchtime,
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SPEAKER_00: but all the indexes still closed solidly higher on the day and back into the green
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SPEAKER_00: for the week.
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SPEAKER_00: Tuesday's misery and pessimism suddenly seemed a million miles away,
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SPEAKER_00: emphasizing the exhausting,
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SPEAKER_00: data-addicted rollercoaster nature of markets right now.
5:01
SPEAKER_00: The interest rate futures market swiftly pulled forward the most likely month for
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SPEAKER_00: the first rate cut to September from December,
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SPEAKER_00: with the probability of a second cut in 2024 now priced at around 50-50.
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SPEAKER_00: Wall Street seems unable to stay in the middle right now when it comes to Fed expectations.
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SPEAKER_00: It seems to constantly gyrate from the glass is completely full,
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SPEAKER_00: six or seven rate cuts in 2024,
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SPEAKER_00: to there's nothing left in the glass at all.
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SPEAKER_00: Next move is an interest rate increase.
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SPEAKER_00: spending very little time anywhere in between,
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SPEAKER_00: and had convinced itself over the past couple of weeks that Powell could put rate
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SPEAKER_00: hikes back on the table at this meeting,
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SPEAKER_00: only to see him reject the idea out of hand.