Week of June 3rd, 2024 Recap
News Flow:-
ISM Manufacturing - new orders declined 3.7pts to 45.3; production declined 1.1pts to 50.2; Employment rose 2.5pts to 51.1; Prices declined 3.9pts to 57.
Atlanta Fed GDP Now at 1.7% in 2nd quarter, down from expected 2.7%
JOLTS - job openings declined to 8.059M in March from 8.355M (8.88M in dec 23).
ADP Job report: +152k for May, estimated at +175k, April was +188k.
ISM Services - +4.4pt month over month to 53.8; Business activity +10.3pts while new orders rose +1.9pts, empoyment +1.2pts. New Prices - 1.1pts.
NFP- +272k (est. at +180k, April at 175k), household survey showed -408k employed people, lower participation rate -20bps; unemployment at 4% (est. at 3.9%, April at 3.9%), wages + 0.4% M/M (est at +0.3%, 4.1% YoY)
Its pretty clear from this weeks news flow we are getting some deterioration in growth within the Economy. Jobs openings to employment are showing signs of weakening. GDP and manufacturing are slowing while the only bright spot from last week is ISM services.
SPX notched a 1.25% move for the week but its mainly driven by tech. We are seeing more loopsided gains from this group and it worries me somewhat. I mentioned last week already how I find semi/AI a but frothy. I think Druckenmiller puts it succinctly, we are overhypying it short term but underhyping it long term.
Fed:
What we’ve seen in the last few weeks definitley gives the Fed reasons to ease at a faster trajectory. I still think there is a higher likelihood for a cut to come after November but if things were to deteriote faster, it may warrant a cut in September.
Inflation is still important as mentioned last week but its not going to take center stage in my opinion. All eyes on Fed’s Wednesday commentary.
Stocks:
With the rally back up to all time high, I see the risk reward favoring more on the downside than the upside. The stock markets reaction function still favors for a rate cut (bad news is good news). But I do think any wording by the Fed on being more patient as oppose to taking a more dovish stand by highlighting and reinfocing a faster rate cut trajectory will see stocks sell off this coming week.