Hey Folks, markets are very ugly giving us another 4 consecutive down weeks. Worst four month start in US markets since 1930s. Get my take where to next?
WEEKLY SOUND BITES:
The major indexes endured a fourth consecutive week of losses with the DOW just shy of an official correction while the S&P moved into correction and the NASDAQ and Russell are in the Bear camp going into Friday’s close. As market records go, it was the worst four months of the year since the 1930s…It was NASDAQ’s worse start to the year since 1971.
The biggest data surprise may have been the Commerce Department’s advance estimate showing that the economy contracted at annualized rate of 1.4% in the first quarter, well below consensus expectations of a roughly 1.0% expansion. Solid consumer spending (up 2.7%) and business investment (up 7.3%, well above expectations) suggested that it was too early to conclude that the data signaled the onset of a recession. The year-over-year increase in the core personal consumption expenditures (PCE) price index, the Feds preferred inflation gauge, eased to 5.2% in March, its first deceleration in over a year. The year-over-year headline PCE measure advanced to a 40-year high of 6.6% but also missed estimates.
After decreasing early in the week, the yield on the benchmark 10-year U.S. Treasury note ended near where it began, seemingly pushed higher on Friday, in part, by the favorable consumer spending data. Coming up this week we will hear from “Boom Boom” Powell and get his take on anticipated FED action to combat these inflationary markets. He will also discuss his Balance Sheet reduction plans as well…note some analysts indicate the cumulative effect of the US BS Reduction over 4 years will be the equivalent of a 210 BPS rate hike. The Fed Fund Futures is pricing in a year-end target interest range of 2.75% – 3%.
Shares in Europe pulled back on concerns about slowing economic growth, high inflation, and tightening monetary policy. The eurozone economy expanded 0.2% sequentially in the first quarter, as surging commodity prices and disruptions related to Russia’s invasion of Ukraine weighed on the pace of growth. Inflation in the euro area accelerated to 7.5% in April, reaching the highest level since the euro was launched.
The BoJ raised its outlook for inflation, forecasting that the consumer price index (CPI) will rise by a median 1.9% on the previous year in the 2022 fiscal year compared with the 1.1% increase it predicted in January of this year. They also revised down its forecasts for economic growth over the same period from 3.8% year on year to 2.9%. Factors cited included the resurgence of the coronavirus, rising commodity prices, and a slowdown in overseas economies.
Concerns about the steep cost of China’s zero-tolerance policy regarding the coronavirus continued as the government stepped up containment measures and rolled out mass testing in Beijing and Hangzhou. Shanghai’s monthlong lockdown continued to reverberate as many foreign residents have fled and factories struggled to reopen
Enjoy this week’s Round-Up
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