Inflation Grips US Market from 13 May ?
Past Week In Review.
US stock market rally started the week strong, with the Dow Jones and S&P 500 reclaiming their 50-day moving averages on Mon, 6 May 2024.
The Dow and S&P 500 kept moving toward record highs for the rest of the week while Nasdaq paused.
The Dow jumped 2.2% in the May 6 -10's trading week, extending a win streak to 8th trading sessions.
The S&P 500 index popped 1.85%.
The Nasdaq composite advanced 1.1%.
SPDR ETF Sector Tracker.
The market rally advance has been broad, as the sector ETFs' performance shows.
Leading stocks hail from a variety of sectors, with many sectors flashing buy signals last week. (see below)
US Reports Out.
May 6 - 10 also saw a handful of US reports out.
(1) US Weekly Jobless claims.
For the week ending 04 May 2024, US jobless claims totaled a seasonally adjusted 231,000.
This is up by +22,000 claims from the week before.
Incidentally, it was the highest claims number since late August 2023.
Will this be a “potential sign” that an otherwise robust labour market is changing?
(2) US Consumer Sentiments.
On Fri, 10 May 2024, the latest University of Michigan consumer sentiment survey was out.
Preliminary data showed -13% decline in overall sentiment for May 2024. (see above)
Consumer Sentiment index reading came in at 67.4, its lowest level since July 2022.
It is also well below economist expectations of 76.2.
US consumers are becoming increasingly worried about:
The trajectory of the US economy amid sticky inflation.
The prospect of high interest rates for longer than initially hoped.
With the consumer sentiment index showing “inflation expectations picking up”, that “helped” to chill market’s momentum on Friday.
I feel US market will once again be “jittery” overall, easily until Wed, 15 May 2024.
This is because on Wednesday, US inflation report - Consumer Price Index (CPI) for April 2024 will be out.
This would be 1 of 5 litmus tests on whether US inflation is cooling before FOMC’s fateful Sep 17-18 meeting.; that many at Wall Street predicted will be the first interest cut.
March inflation Recap.
Annualized core CPI for March 2024 came in at 3.8% YoY versus 5.6%, a year ago.
It remained “status quo” from February 2024 inflation data and is +0.1% higher than estimates.
It is interesting to know that the last time core CPI was 3.8% was for May 2021.
March’s continued rise in core CPI was primarily driven by a rise in the shelter component, which contributed to over 60% of the YoY gain in core prices, followed by these others - motor vehicle insurance (+22.2%), medical care (+2.2%), recreation (+1.8%), and personal care (+4.2%).
The 3-month annualized rate has rebounded to a 10-month high of 4.5%, indicating inflation may remain higher for longer than expected.
Predictions, predictions, predictions.
(1) Producer Price Index (PPI).
Kicking off US inflation data will be the Producer Price Index (PPI) report, slated for 14 May 2024, a day ahead of the CPI report.
PPI is a measure of inflation from the perspective of businesses and industries, measuring price changes before ordinary consumers buy the end product.
Analysts tend to see PPI as a bellwether of CPI.
The latest US inflation data will be closely watched because any uptick could further delay the start of Federal Reserve interest rate cuts.
Forecast summary:
PPI (MoM): 0.3% (estimates) vs 0.2% (March 2024).
PPI (YoY): 2.1% (estimates) vs 2.1% (March 2024).
Core PPI (MoM): 0.2% (estimates) vs 0.2% (March 2024).
Core PPI (YoY): 2.3% (estimates) vs 2.4% (March 2024).
(2) Consumer Price Index (CPI).
On forecasts for coming April 2024 inflation, most media covered headline inflation, with nary a cover for core inflation.
Here’s the skinny:
CPI (MoM): 0.4% (estimates) vs 0.4% (March 2024).
CPI (YoY): 3.4% (estimates) vs 3.5% (March 2024).
Core CPI (MoM): 0.3% (estimates) vs 0.4% (March 2024).
Core CPI (YoY): 3.6% (estimates) vs 3.8% (March 2024).
My Viewpoints: Inflation vs Corporate Earnings?
Corporate Earnings will continue to be reported for week beginning 13 May 2024. (see above)
Do not expect the reporting companies to create any wave/s on the equities market.
Reason being they are not exactly the Top tier companies in the “hot” industry sectors of semiconductors, financial services, healthcare or technology.
Attention worthy companies include: (AM-morning, PM- after market closed)
$Home Depot(HD)$ - Tue, 14 May 2024. AM.
NU Holdings Ltd - Tue, 14 May 2024. PM.
$Cisco(CSCO)$ - Wed, 15 May 2024. PM.
$Wal-Mart(WMT)$ - Thu, 16 May 2024. AM.
$Applied Materials(AMAT)$ - Thu, 16 May 2024. PM.
Special mention: $Nu Holdings Ltd.(NU)$.
NU Holdings Limited is a digital bank, targetting the underserved in the South America continent
Berkshire Hathaway has a vested interest in this bank.
For its Q1 2024 earnings, earnings per share (EPS) is forecasted to come in at $0.08 per share YoY vs $0.04 per share.
This would be a +100% gain, if true and its stock price will soar.
However do not expect it to pull the US market along because with a market cap of $56 billion, it does not wield enough clout yet!
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