WEEKLY | MARKET ANOMALIES
Your weekly summary with the most important news for your investments.
Last week, the Dow closed above 40,000 thousand points for the first time in its history, accumulating a year-to-date return of +6.1%. In turn, its peers, the S&P 500 and Nasdaq closed very close to their all-time highs, accumulating returns of +11.2%, respectively, while the 2- and 10-year sovereign yields declined to 4.84% and 4.42%, respectively. With this, market participants believe that there could be two cuts in the monetary policy rate during the rest of the year of 25 basis points each from the current level of 5.5%, since last month's inflation data came in slightly below inflation expectations, a topic that we will address in greater detail below. At the same time, there were two market anomalies during the week, starting with the rebound in the prices of stocks such as AMC and Gamestop, whose weekly returns were extraordinarily high, exceeding +150%, accompanied by a strange rebound of +9% during the week in the price of copper, and with it +30.6% so far this year, closing the week at US$5.08 per pound. These rallies, those of stocks and the price of copper, are attributable to a "short squeeze" where the demand for the instruments forced those who had short positions to close losses by buying such instruments and pushing their prices upwards in a fulminant manner.
This week the focus will be on a series of speeches by various representatives of the Federal Reserve (FED), the mid-week release of the minutes of the last meeting of the issuing institute and the end of the week with the official data on inflation expectations and consumer thermometer published by the University of Michigan. This gives way to the long weekend, as the following Monday, May 27, is Memorial Day, the official start of the U.S. summer period. In between will be reporting other companies in the retail sector including Lowe's, Macy's, Ross Stores Target and TJX accompanied by companies in the technology sector where the focus will be on the results of Nvidia, being one of the companies that has benefited the most from the insatiable demand for everything related to artificial intelligence. In turn, in the coming hours it will be known whether Tesla will be able to compensate its CEO, Elon Musk, the US$55 billion agreed in 2018 in compensation if shareholders choose to ratify the agreement. In 2018 when the company's market capitalization was at US$59 billion the board imposed a series of staggered targets dependent on sales and margin metrics with the improved market capitalization reaching US$650 billion, something that occurred despite skepticism at the time. However, a court ruled that the payout to the executive was too much and had been imposed by a biased board, so now the current shareholders will have to ratify by vote. If Musk receives the bonus, he will have paid for the purchase of X (twitter) with ease.
Let's start with the market anomalies, since last Monday, AMC and Gamestop stock prices returned to the same bullishness of the pandemic years, when a massive group of retail investors went out to buy those shares, forcing all those who had taken short positions, waiting for the stock price to plummet, to go out and buy those shares in hordes, causing the price to rebound in an extraordinary way. It is estimated that the loss of some short funds the previous week would have reached US$1 billion, generating some future bankruptcy, as occurred at the beginning of 2021.
This "short squeeze" occurred after Keith Gill (also known as Roaring Kitty on social media) reactivated his X account on Sunday night, implying that it was a good time to buy these papers. This anomaly had already been studied and investigated by regulatory entities to prevent them from happening again, however, the previous week they occurred quite easily generating a stampede of purchases. But it was not only the equities world, but the price of copper had a discretionary jump in its price as a result of a "short squeeze" causing it to climb +9.3% in the week, surpassing the US$5 per pound threshold. For some, this stampede of the red metal was triggered in part by the imposition of higher tariffs by the US government on Chinese products including electric vehicles (100%), aluminum and steel (25%), solar panels (50%) and a series of other products that will come into effect between 2025 and 2026.
On the macroeconomic front, headline inflation closed the month at 3.4% (from 3.5%) while the core reading closed at 3.6% (from 3.8%) giving market participants encouragement that it at least remains on the downside. In between Fed Chairman Jerome Powell argued the following:
I have said that I don't think it's likely, based on the data we have, that the next move we make will be a rate hike, ..., We didn't expect this to be an easy path, but these [first quarter inflation data] were higher than I think anyone expected, we'll need to be patient and let tight policy do its job. We'll just have to see how the inflation data comes out.
Words that will be repeated in this following Wednesday's minutes.
Finally, on the geopolitical front, the leaders of China (Xi Jinping) and Russia (Vladimir Putin) held a bilateral meeting in which they signed trade collaboration agreements in the face of the imposition of new tariffs by the Biden administration. Meanwhile, the President of Iran, Ebrahim Raisi, along with other political leaders, died in a plane crash yesterday in inclement weather affecting the region. Finally, next June 2, the presidential elections in Mexico will be held between Claudia Sheinbaum, representing the government, and Xóchitl Gálvez, representing the opposition, is shortening entering the final stretch.
In conclusion, as stock indexes are gradually rising on the assumption that inflation is easing and the FED will be able to act by lowering interest rates, market anomalies are being recorded not only in corners of the US stock market, but also in the spectrum of agricultural, energy and metallurgical commodities.
THIS WEEK
Monday (May 20)
Quarterly Reports
Palo Alto Networks, Inc.
Mizuho Financial Group, Inc.
Keysight Technologies Inc.
Li Auto Inc.
Trip.com Group Limited
Zoom Video Communications, Inc.
Economic Reports
Speech by Atlanta Fed President Raphael Bostic
Speech by Fed Board Vice Chairman for Oversight, Michael Barr
Speech by Fed Governor Christopher Waller
Tuesday (May 21)
Quarterly Reports
Lowe's Companies, Inc.
AutoZone, Inc.
James Hardie Industries plc.
Toll Brothers, Inc.
Full Truck Alliance Co. Ltd.
Economic Reports
Speech by FED Governor Christopher Waller
Speech by Atlanta Fed President Raphael Bostic
Remarks by Fed Governor Christopher Waller
Annual Change in the Red Book Report
Wednesday (May 22)
Quarterly Reports
NVIDIA Corporation
PDD Holdings Inc.
TJX Companies, Inc. (The)
Target Corporation
Analog Devices, Inc.
Snowflake Inc.
Economic Reports
Home Sales Report
Home Sales Monthly Change Report
Federal Open Market Committee Minutes Report
Thursday (May 23)
Quarterly Reports
Intuit Inc.
Toronto Dominion Bank (The)
Medtronic plc
Workday, Inc.
NetEase, Inc.
Economic Reports
Chicago Fed Activity Index Report
Initial Jobless Claims Report
Building Permits Report
Friday (May 24)
Quarterly Reports
Booz Allen Hamilton Holding Corporation.
Diana Shipping inc.
Mesa Laboratories, Inc.
Hibbett, Inc.
Buckle, Inc. (The)
Economic Reports
Monthly change order report for non-perishable products
Now you have more information about your investments. See you next week with more news.
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