Profit Taking, Crude Falls, Job Market Robust, Inflation Remains (April 1 Market Recap)
Profit Taking, Crude Falls, Job Market Robust, Inflation Remains
Dow 34,818 or (43) or (0.12%)
Nasdaq 14,261 or +92 or +0.64%
S&P 4,545 +82 or +1.8%
USD10Y 2.377% (11.5bp) or (4.6%)
Profit Taking, Crude Falls, Job Market Robust, Inflation Remains
It wasn’t much of a week in terms of market performance due to quarter-end profit taking on Thursday, which doomed an otherwise solid week of trading.
Oil prices gave up all the gains from last week and traded down 10% on the week to close just below $100/bbl (WTI) after President Biden announced that the U.S. would release 1 million bbl/day from the Strategic Petroleum Reserve.
Economic data was solid if not spectacular. The labor market continues to be extremely tight. Jobless claims missed but were still near historic lows and continuing claims set a new multi decade low. JOLTS (Job Openings and Labor Turnover Survey) showed 11.3 million job openings, 200,000 more than expected. Both the ADP and Non-Farm Payroll reports were solid, with the former exceeding and the latter missing expectations. The Consumer Confidence number missed but was still at an elevated level. The manufacturing numbers were a mixed bag with Chicago PMI and Markit PMI beating and ISM missing, but all in all they were all solid numbers. All of which is to say that the Fed has plenty of cover to raise rates perhaps as much as 50bp at their next meeting, May 3 and 4. The market has already priced in a 50bp hike as the Core PCE deflator number came in at +0.4%, only slightly decreasing from the +0.5% increases seen every month since October 2021.
Russia’s Quagmire Continues
As of the time of this writing, Ukraine has reported control of the entire Kyiv region as Russian troops have pulled out after facing fierce resistance and what can only be described as a complete logistical disaster…Earlier this week a fuel depot in Belgorod, Russia, on the eastern border of Ukraine and north of the fiercely contested Ukrainian city of Kharkiv was destroyed. Ukraine has neither confirmed nor denied responsibility. The Russian government has indignantly protested the strike, blaming the Ukrainians and stating that it has undermined ongoing peace talks…Lithuania announced that starting in April, they would no longer take deliveries of Russian natural gas. As a result, Russia has not delivered gas to any of the Baltic states over the last 48 hours.
Minding the Twos and Tens
The yields on the 2-year and 10-year U.S. Treasury bonds inverted momentarily on Thursday but closed without inverting. On Friday however, the two finally inverted at the close with the 2-year paying 0.06% more than the 10-year. Research suggests that when 2-year rates exceed those of the 10-year, a recession is likely to follow within 12-18 months.
Deaths and hospitalizations continued to fall precipitously but infections levelled off as BA.2 gains a foothold in the Northeast and the South. There is some concern surrounding childhood infections which, while a small number, have been growing as a percentage of overall infections. In other COVID news, the CDC has recommended a second booster of either the Pfizer or Moderna vaccines for those 50 years of age and older. And Shanghai, a city of 25 million people, continues to be shut down as China tries to enforce its zero Covid policy.
It is an extremely light week for economic data points. Multiple Fed members will speak. However, the highlight of the week will be the release of the March FOMC (Federal Open Market Committee) minutes and what was said regarding the reduction of the Fed’s $9 trillion balance sheet.
Market Data Points Next Week
- Monday – N/A
- Tuesday – March ISM Services Index. Fed Presidents Kashkari (Minneapolis), Williams (NY) and Fed Governor Brainard all speak.
- Wednesday – March FOMC minutes. Fed President Harker (Philly) speaks.
- Thursday – Initial Jobless Claims. Fed Presidents Bullard (St. Louis), Bostic (Atlanta), Williams (NY) and Evans (Chicago) all speak.
- Friday – N/A
April 1 Market Recap Trading…
Monday – Dow +94 to 34,955, Nasdaq +185 to 14,354, S&P +32 to 4,575, USD10Y (1.5bp) to 2.477%
- Eight of eleven S&P sectors traded higher today led by Consumer Discretionary, Real Estate, and Technology. Energy was the big loser, down 2.56%.
- The yield curve continued to flatten with the US2YR at 2.34% vs the US10YR at 2.477%. The US5YR yield rose above the US30YR today for the first yield curve inversion since 2006.
- Crude traded down 7% to $106/bbl (WTI).
Tuesday – Dow +338 to 35,294 Nasdaq +264 to 14,619, S&P +56 to 4,631, USD10Y (7.7bp) to 2.40%
- Markets continued to rally today as there was growing optimism surrounding a possible Russia-Ukraine ceasefire.
- Ten of the eleven S&P sectors traded higher today led by Real Estate, Technology, and Consumer Discretionary. Energy traded down -0.44% as crude prices continued to fall ($104/bbl WTI).
- Consumer Confidence posted a slight miss at 107.2 vs expectations of 107.5.
- The Job Openings and Labor Turnover Survey (JOLTS) showed 11.3 million job openings, higher than the 11.1 million expected.
- The yield curve continued to flatten with the US2YR at 2.34% vs the US10YR at 2.4%. The curve briefly inverted by 0.03% during the trading session.
Wednesday – Dow (65) to 35,228, Nasdaq (177) to 14,442, S&P (29) to 4,602, USD10Y (4.2bp) to 2.358%.
- Energy (+1.17%) and crude oil (+3%) caught a bid today as Germany considered rationing natural gas and U.S. crude inventories fell.
- Only four of eleven S&P sectors traded higher today led by Energy, Utilities and Health Care. Consumer Discretionary, Technology and Financials were the three worst performers.
- March ADP Employment reported 455,000 jobs created vs expectations of 450,000.
- Final Q4 GDP was 6.9% vs 7% expected.
Thursday – Dow (550) to 34,678, Nasdaq (221) to 14,220, S&P (72) to 4,530, USD10Y (3.1bp) to 2.327%.
- All eleven S&P sectors traded down today led lower by Financials, Communication Services, and Consumer Discretionary.
- Jobless claims came in at 202,000 claims vs estimates for 197,000 vs last week’s slightly revised higher print of 188,000 claims. Continuing claims fell to 1.31 million people.
- February Core PCE was up 0.4% in line with expectations.
- March Chicago PMI delivered to the upside at 62.9 vs 57 and February’s 56.3.
- WTI fell 6% to close at $100/bbl on news that the United States will release an average of 1 million barrels of oil per day from the nation’s reserves.
Friday – Dow +139 to 34,818, Nasdaq +41 to 14,261, S&P +15 to 4,545, USD10Y +5bp to 2.377%.
- Eight of eleven S&P sectors traded higher today led by Real Estate, Utilities, and Consumer Staples.
- March Non-Farm payrolls missed expectations at 431,000 jobs created vs 490,000.
- The Unemployment Rate ticked down again to 3.6% vs February’s 3.8% and the Labor Participation rate increased slightly from 62.3% to 62.4%.
- March ISM Manufacturing missed but Markit Manufacturing beat expectations.
- Crude Oil continued its slide, closing below $100/bbl.
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