Economic Data rules US Market this Week. Nvidia ?
Memorial Day.
As US market is closed to celebrate Memorial Day - a day for visiting cemeteries and memorials to mourn the military personnel who died in the line of duty.
I wonder how many US citizens actually do pay homage to those who perished in the war.
And whether everyone realizes the senselessness of war and its place in this 21st century?
Equally important is the deterrence a country possess to dissuade any potential aggressor to even consider mounting an attack.
US Market - This Week.
This week follows the Fed’s officials earlier (in the month) coalesced around:
Desire to hold interest rates higher for longer.
“Many” questioned whether policy was restrictive enough to bring inflation down to their target, according to minutes of the FOMC committee’s last meeting.
With the who’s who already reported their quarterly earnings, US market this week is likely to be “influenced” by economic data out between Tuesday and Friday.
The 2 most anticipated economic reports would be:
US Gross Domestic Product (GDP) - Thu, 30 May 2024.
Personal Consumption Expenditure - Fri, 31 May 2024.
GDP (Q1 2024) - 2nd Estimates.
The 2nd estimates of US Q1 2024’s Gross Domestic Product (GDP) will be one of the reports that will affect US market directly.
US Q1 2024 economic growth came in far weaker than economists had expected. (see above)
On 25 Apr 2024, the Bureau of Economic Analysis (BEA) advance estimate showed US economy grew at an annualized pace of 1.6% during the period.
Totally missing the 2.5% growth expected by economists surveyed by Bloomberg.
For the impending estimates, economists believe after downwards revisions to retail sales data in February and March, the GDP number will fall to 1.3%.
Market will rejoice if the 2nd readings remain flat like 1st estimates or lower like analysts’ forecast.
This is because the possibility of an interest cut in September 2024 becomes on the card again.
PCE - April 2024.
Economists expect US’s April 2024 Core PCE, to clocked in at 2.8% YoY, same inflation rate as March’s data. (see above)
For monthly Core PCE, economists expect it to rise by 0.3% MoM, also in line with March’s data.
Inflation's trajectory remains “flatline” for April 2024.
FOMC members have also started to monitor data points like (a) 3-month annualized percent change, and (b) 6-month annualized percent change to make assessments without distortion from base effects and evaluate progress towards the 2% target for core PCE.
April’s Core PCE 3 months annualized percent change should dip marginally because January Core PCE
Other Economic Reports / Events.
Other economic reports out this week that officials may be interested:
(3) Conference Board Consumer Confidence - Tue, 28 May 2024.
Provides a relatively quick snapshot of consumer sentiment.
Report is a valuable and early sign of potential changes in consumer spending, that is a major driver of the US economy.
(4) Federal Reserves Beige book - Wed, 29 May 2024.
Also known as the Summary of Commentary on Current Economic Conditions by Federal Reserve District.
This report is published 8 times yearly.
It provides a qualitative look at economic conditions.
Report is a valuable tool for understanding economic trends at US regional level.
It also provides the Fed with a qualitative perspective across US’s 12 Federal Reserve Districts and supplement the quantitative data.
(5) Fed’s Continual Socialization.
According to Bloomberg, the US central bankers continue with their socialization. (see above)
Speakers during the holiday-shortened week includes:
John Williams.
Lisa Cook.
Neel Kashkari.
Lorie Logan.
Not Just Nvidia Anymore !
$NVIDIA Corp(NVDA)$ released its quarterly earnings on 23 Apr 2024, after market closed.
On following trading day, its fantastic results did not move the broader market higher.
Objectively speaking, the AI semiconductor leader did improve $S&P 500(.SPX)$ earnings growth for Q1 2024.
Prior to Nvidia’s earnings released, the S&P 500 had been pacing for growth of 5.7%.
After Nvidia's report, the index is pacing for growth of 6% in the first quarter.
More importantly, strategists believe Nvidia's outsized impact on earnings will decline throughout 2024, supporting a broadening of the stock market rally.
This means the stock market rally is likely to spread to more companies.
Things are broadening out, to:
Power.
Commodities.
Utilities,
some of which I have mentioned in my previous posts.
Possible investable include:
Utilities - $Utilities Select Sector SPDR Fund(XLU)$
Power - $Exxon Mobil(XOM)$ or Buffett’s favourite $Occidental(OXY)$
As the saying goes, “it takes a village to raise a child”. Similarly, for AI, it takes many industrious companies to make AI run — on its own terms and pace.
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