Market collapse or yet another fake?
Wall Street lost share yesterday, with the S&P 500 down about 0.30%, the Nasdaq by 0.2% and the Dow Jones by around 330 points, dragged down by the collapse of the technological and communications services sector. The actions of Salesforce they lost more than 18% after the company published a quarterly report below expectations.
Also Oracle (-3.5%), TMO (-1.9%) e Adobe recorded a sharp decline (-3.5%). Among the megacaps, Microsoft (-2%), Amazon (-0.8%), Half (-1.5%) e Alphabet (-0.9%) recorded losses while Nvidia (+0.2%) e Apple (0.5%) managed to close with a plus sign.
Meanwhile, on the bond front, sales of treasuries stopped, coinciding with macro data that came out lower than expected, easing the tension that had reached its peak with the words of the President of the Fed by Minneapolis Kashkari.
Yesterday’s data, however, if confirmed in the near future, leave some glimmers open that the Fed may cut interest rates this year. The growth of GDP was revised downward to 1.3% in the first quarter, mainly due to slowing consumer spending. And this afternoon, keep an eye on the data on Price consumer expenditure, which is the key data to measure American inflation.
Currencies
The strengthening of the dollar, a typical risk-off movement, for now, has revealed itself as a partial and limited movement, with a frustrated attempt, for the umpteenth time, to break the key supports against the main currencies. With the release of data on jobless It is on GDP of the first quarter, at the second reading, the greenback, which seemed to be heading for a breakout of all previous levels, reversed course very quickly with a reaction of the euro, pound, CAD and oceanic currencies which seems very interesting, although the trend of short-term fund, still favorable to the American currency and risk aversion.
But everything as usual depends on the data, on one Boy that it could start to get serious, and by the fact that it is very difficult to imagine that in the medium term i US rates do not affect growth and the main macro aggregates. This, in our opinion, is the real reason why the American currency has not broken through to the upside, i.e. in fact analysts and investors, despite the Fed rhetoric, are aware that in any case the Fed will lower twice, once in September and the second in November 2024 .
US GDP grows less than expected
The US economy grew by an annualized 1.3% in the first quarter of 2024, lower than the 1.6% advance estimate and 3.4% in the fourth quarter, mainly due to a downward revision of the consumer spending. The second estimate was in line with market forecasts and continues to point to the lowest growth since the contractions in the first half of 2022.
There consumption spending slowed more than initially expected, due to the slowdown in goods and services sector. Furthermore, public spending was revised slightly upwards (1.3% versus 1.2%) and both exports (1.2% versus 0.9%) that the imports (7.7% versus 7.2%) increased more, even though the trade balance relating to goods alone worsened, reaching almost 100 billion dollars.
Government bonds
The yield on the 10-year US Treasury bond fell below 4.58% on Thursday, down from a four-week high of 4.61% hit yesterday after the release of afternoon data. Numbers that showed that the GDP American grew less than previously reported during the first quarter, further distancing previous expectations for higher growth. Which means that some cracks in the Stars and Stripes economy continue to appear.
Furthermore, the initial requests for unemployment remained above the averages for the year. The developments have favored a scenario that would allow the Federal Reserve to ease monetary policy, with expectations of a rate reduction in September. However, the verbal rhetoric of various FOMC representatives remains strongly oriented towards a period of firm rates, with no easing expected for 2024.
Data
The PMI of manufacturing sector it fell to 49.5 points in China in May, from 50.4 in April, also lower than market forecasts of 50.5. This is the first decline in industrial activity since February, driven by the decline in new orders and foreign demand. In Japan, industrial production fell 0.1% month-on-month in April, versus market forecasts for an increase of 0.9%.
However, again from the country of the rising sun, comforting news arrives on retail sales, which grew by 2.4% on an annual basis in April, above the 1.1% of the previous figure, higher than the forecasts of +1.9%. On the output data front, we highlight the numbers on inflation in the Eurozone, expected, at +2.7% on an annual basis, while in the afternoon there is great anticipation for the data relating to US PCEthe true measure of inflation.
Senior Analyst at ActivTrades*
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