Weekly Macro Matters
Macro Matters – Weekly review, w/c May 6
April saw a dip in U.S. stock performance, with the S&P 500 closing the month down 4.1%. However, late-week rebounds and optimism about potential Federal Reserve rate cuts provide hope for recovery. Key economic events, including the Fed’s stance on rates and major earnings reports, have shaped market sentiment.
TradeDay Macro Matters
Macroeconomic / Geopolitical Developments
• Stocks dip and rebound heading into May
• Fed not as hawkish as markets feared
• Amazon and Apple rally post-earnings
• U.S. Employment report weaker than expected, fuels rate cut hopes
Stocks Dip and Rebound Heading into May
In April, the U.S. stock market’s rally lost steam, closing with a 4.1% drop in the S&P 500 due to persistent inflation and weak economic growth. Despite fears of stagflation, the S&P 500 maintained a 6% year-to-date gain. Hopes for future rate cuts and positive inflation data kept investors optimistic, while U.S. stocks rebounded as investors targeted sectors tied to economic recovery.
Fed Not as Hawkish as Markets Feared
The Federal Reserve held interest rates steady at 5.25%-5.50%, emphasizing caution about inflation. Fed Chair Jerome Powell noted the challenges in achieving the 2% inflation target, delaying potential rate cuts. Markets interpreted Powell’s remarks as measured, easing fears of further rate hikes and lifting U.S. stock and bond prices.
Amazon and Apple Rally Post-Earnings
Amazon exceeded expectations with a $143.3 billion revenue, driven by AWS growth. Bank of America raised its price target to $210, reflecting optimism about profitability. Apple, meanwhile, rallied 6% after surpassing earnings forecasts and announcing a $110 billion stock buyback, signaling confidence in its market position.
U.S. Employment Report Weaker Than Expected, Fuels Rate Cut Hopes
April’s employment report revealed weaker job creation and slower wage growth, sparking speculation about Federal Reserve rate cuts. The unemployment rate edged up to 3.9%, with markets responding positively to the reduced inflationary pressure. Treasury yields dropped, and the likelihood of rate cuts increased to 72% according to the CME FedWatch tool.
What’s Ahead
Central Bank Watch:
• BoE Interest Rate Decision on Thursday
• RBA Interest Rate Decision on Tuesday
Macro Data Watch:
Light data week, with notable non-U.S. releases including global PMI data, EU Retail Sales, and UK GDP.
Major Macro Data:
• 05/06/2024: Global Composite and Services PMI; EU PPI
• 05/07/2024: RBA Interest Rate Decision; EU Retail Sales
• 05/08/2024: German Industrial Production
• 05/09/2024: China Trade Balance; BoE Interest Rate Decision
• 05/10/2024: UK GDP; Canada Employment; U.S. Michigan Consumer Sentiment Index
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