Macro Matters – Weekly review, w/c April 22

TradeDay Macro Matters

Macroeconomic / Geopolitical Developments

• Stocks slide, bond yields surge, US dollar holds gains in risk-off shift

• Increased Middle Eastern tensions lead to flight to quality

• Fed shifts away from early rate cuts amidst stubborn CPI

• Earnings remain mixed

Stocks Slide, Bond Yields Surge, US Dollar Holds Gains

US stocks faced losses, with the S&P 500 posting its fifth consecutive daily decline, the Nasdaq Composite extending its downturn, and the Dow Jones ending lower for the week. Investor sentiment soured following comments from Federal Reserve officials signaling that rate cuts are unlikely until late 2024. Bond markets reflected heightened volatility, with the 10-year Treasury yield rebounding after a temporary drop caused by geopolitical risks. The US dollar strengthened, supported by the country’s robust economic data and diminished prospects of near-term monetary easing.

Increased Middle Eastern Tensions Lead to Flight to Quality

Escalating conflict in the Middle East, following Iran’s retaliation against Israeli airstrikes, has rattled global markets. Investors turned to safe havens like the US dollar and gold, pushing the dollar to multi-year highs against major currencies and gold prices near $2,500 per ounce. Crude oil prices surged amid concerns over potential supply disruptions from the region, contributing to inflationary pressures. These developments underscore the broader economic risks posed by geopolitical instability.

Fed Shifts Away from Early Rate Cuts Amidst Stubborn CPI

Persistently high inflation has led the Federal Reserve to adopt a cautious stance on rate cuts. The Consumer Price Index accelerated to 3.5% in March, driven by rising shelter and commodity costs. Fed Chair Jerome Powell’s recent comments suggest rate cuts may be limited to one or two this year, a significant shift from earlier expectations. Investors are recalibrating their outlook, with skepticism about the Fed’s ability to ease monetary policy without exacerbating inflation.

Mixed Messages from Netflix

Netflix’s quarterly results showcased both strength and uncertainty. Profits rose 79% to $2.3 billion, driven by 9.3 million new subscribers. However, its decision to stop reporting subscriber counts starting in 2025 raised concerns about long-term growth prospects, causing shares to fall 7.3%. Speculation over Netflix’s potential entry into sports entertainment, including a bid for NBA media rights, highlights its efforts to diversify and sustain growth in a competitive streaming market.

What’s Ahead

Central Bank Watch:

• PBoC Interest Rate Decision (Monday)

• BoJ Interest Rate Decision (Friday)

Macro Data Watch:

• 04/22/2024: PBoC Interest Rate Decision; EU Consumer Confidence

• 04/23/2024: Global Composite, Services, and Manufacturing PMI (Australia, EU, UK, US)

• 04/24/2024: Australian CPI; US Durable Goods Orders

• 04/25/2024: US Core PCE, Q1 GDP, Initial Jobless Claims

• 04/26/2024: Japan Tokyo CPI; BoJ Policy Decision; US PCE and Michigan Consumer Sentiment

This week’s focus will be on central bank meetings, inflation data, and global PMI releases, offering key insights into economic momentum and monetary policy trajectories.

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