Macro Matters – Weekly review, w/c April 29

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 mixed so far

Stocks Rebound, but Yields Edge Higher

Wall Street rebounded with the Nasdaq gaining over 2%, supported by strong earnings from Microsoft and Alphabet. The S&P 500 and Dow Jones rose 1.0% and 0.4%, respectively, countering earlier losses driven by Meta’s spending concerns and slower US Q1 economic growth. In the UK, the FTSE 100 hit a record high, while European markets saw gains amid positive corporate actions. However, bond yields climbed, with the 10-year US Treasury yield reaching 4.70%, reflecting ongoing inflation fears and dampened rate cut expectations.

Three of the Magnificent 7 Surge This Week

Tesla surged 18% after highlighting advancements in autonomous vehicles and robotics during its earnings report.

Meta dropped nearly 11% despite beating earnings expectations, as heavy AI investments raised concerns about profitability.

Alphabet introduced its first-ever dividend and posted strong earnings, leading to a 12% stock jump.

Microsoft rose 3% following growth in its AI-driven Azure cloud segment, showcasing successful tech integration.

US PCE Higher Than Expected, but Markets Unfazed

March’s US PCE Price Index rose to 2.7% year-over-year, surpassing expectations. However, markets reacted calmly, with modest movements in the US Dollar Index and Treasury yields. Personal income and spending showed resilience, with spending up 0.8% for the month despite a declining savings rate. Futures traders adjusted expectations for rate cuts, now forecasting a 44% chance of two cuts this year.

Big Week Ahead: Fed, Global PMI, and US Employment

The upcoming week features the Federal Reserve’s interest rate decision, global PMI data, and the US employment report. Markets anticipate further insights on inflation and rate cut timing during Fed Chair Jerome Powell’s May 1 press conference. Key data includes manufacturing and services PMIs from China, Europe, and the US, as well as GDP and CPI data from multiple regions. Friday’s US employment report will provide fresh insights into labor market conditions and potentially influence monetary policy.

What’s Ahead

Central Bank Watch:

• Fed Interest Rate Decision (Wednesday)

• BoJ Monetary Policy Meeting (Thursday)

Macro Data Watch:

• 04/29/2024: EU Consumer Confidence and Economic Sentiment; German CPI

• 04/30/2024: Japan Unemployment, China PMI, EU GDP, and CPI; US Consumer Confidence

• 05/01/2024: US ADP Employment Change, Manufacturing PMI, Fed Interest Rate Decision

• 05/02/2024: BoJ Policy Meeting; Global Manufacturing PMI

• 05/03/2024: US Unemployment Report, Global Services PMI

This pivotal week promises to provide critical insights into the trajectory of inflation, employment, and central bank policies globally.

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