Economic Data Slows, Labor Cracking, Fed Undeterred (Market Recap April 7)
Indices
- Dow 33,485, +211 or +0.63%.
- Nasdaq 12,087, -134 or –1.10%.
- S&P 4,105, -4 or –0.10%.
- USD10Y 3.2884, -20.6bp or –5.9%.
- WTI Crude $80.46 bbl, +$4.76 or +6.29%.
Economic Data Slows
All the economic data that was released last week came in below expectations. Both March S&P U.S. Manufacturing PMI and ISM Manufacturing were in contraction territory. And while the services segments were both a shade above contraction, they both missed market expectations as well. February Factory Orders missed expectations and Construction Spending also missed. A snapshot of the economy, the Atlanta’s Fed GDPnow tool predicts only +1.7% annual GDP growth for the first quarter.
Labor Cracking?
The overwhelming focus of the Federal Reserve over their last several meetings has been squarely upon the labor market and their opinion that unemployment must rise in order to quell inflation. Like the economic data above, every data point last week indicated that they are starting to get their wish. On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) dipped below 10 million openings for the first time in two years. On Wednesday, the ADP Private Payrolls survey badly missed expectations, showing only 145,000 jobs added in March vs expectations of 261,000. On Thursday, Initial Jobless Claims spiked to 228,000 vs 200,000 expected. Some noted that this was actually a decrease from the previous week’s seasonally adjusted number of 246,000, but this was still a sizeable miss. Finally on Friday, March Non-Farm payrolls dipped slightly below expectations at 236,000 vs 238,000 expected. In addition, another piece of data that prior to this inflationary period, was not widely followed, Average Hourly Earnings, met expectations at +0.3% which is now the 24th straight month that wages have not kept up with the pace of inflation.
Fed Undeterred
The Fed’s message last week was that there was still work to do and that their terminal rate would cross above the 5% threshold. On Monday, St. Louis Fed President Bullard said he believes rates need to settle in the 5.5%-5.75% range. On Tuesday, Cleveland Fed President Mester said the terminal rate needs to go above 5.1%. As a result of these speeches, the Fed Watch Tool now shows a 71.2% chance of a 25 bp rate hike up from just 48.4% chance a week ago.
Next Week
While next week’s economic calendar is light, bank earnings will kick off the earnings season and two very important inflation data points will be released: CPI and PPI on Wednesday and Thursday respectively.
Economic Calendar
- Monday – N/A.
- Tuesday – N/A.
- Wednesday – March Consumer Price Index (CPI), FOMC minutes.
- Thursday – Initial Jobless Claims, March Producer Price Index. Earnings: Delta Airlines (DAL), First Republic Bank (FRC).
- Friday – March U.S. Retail Sales, April Consumer Sentiment. Earnings: JPMorgan Chase (JPM), Citibank (C), PNC (PNC), Wells Fargo (WFC), BlackRock (BLK).
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
April 7 Daily Trading Recap…
Monday – Dow +327 to 33,601, Nasdaq -32 to 12,189, S&P +15 to 4,124, USD10Y –6.4bp to 3.43%.
- Seven of eleven S&P sectors traded higher today, led by Energy, Healthcare, and Materials.
- March Final S&P U.S. Manufacturing PMI showed contraction again at 49.2 vs expectations of 49.3 and vs last month’s 49.2 print.
- March ISM Manufacturing also showed contraction at 46.3% vs expectations of 47.3% and vs last month’s 47.7% print.
- Oil was the story today as OPEC+ announced another production cut of 1.6 million bbl/day beginning in May and lasting through 2023. WTI soared 6.28% to settle at $80.42/bbl.
Tuesday – Dow -198 to 33,402, Nasdaq -63 to 12,126, S&P -24 to 4,100, USD10Y –9.3bp to 3.337%.
- Seven of eleven S&P sectors traded down, led lower by Industrials, Energy, and Materials.
- The February Job Openings (JOLTS) report was surprisingly disappointing registering only 9.9 million openings vs 10.5 million expected and last month’s 10.6 million openings. This is the first time openings have fallen below 10 million in two years.
- The Reserve Bank of Australia (RBA) paused rate hikes after ten consecutive increases. However, the RBA did note that further increases would be necessary to continue to battle inflation.
Wednesday – Dow +80 to 33,482, Nasdaq –129 to 11,996, S&P -10 to 4,090, USD10Y +0.2bp to 3.287%.
- Seven of eleven S&P sectors traded down today, led lower by Consumer Discretionary, Industrials, and Technology.
- March ADP Private Payrolls missed expectations badly with 145,000 jobs added vs expectations of 261,000.
- March S&P Final U.S. Services PMI missed expectations at 52.6 vs expectations of 53.8 and was down vs last month’s print as well (53.8).
- March ISM Services Index was no different at 51.2%, down month over month (55.1%) and missing expectations of 54.3%.
Thursday – Dow +2 to 33,485, Nasdaq +91 to 12,087, S&P +14 to 4,105, USD10Y +0.1bp to 3.288%.
- Eight of eleven S&P sectors traded higher today, led by Communication Services, Utilities, and Real Estate.
- Jobless claims spiked higher to 228,000 vs the 200,000 forecast and last week’s seasonally revised print of 246,000.
Friday – Markets Closed in Observance of Good Friday.
- March Non-Farm Payrolls were slightly below expectations at 236,000 vs 238,000 and vs last month’s 326,000 jobs added.
- March Average Hourly Wages were in line at +0.3% and decreased month over month to +4.2% vs +4.3% last month.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.