WEEKLY | MIXED MACROECONOMIC DATA
Your weekly summary with the most important news for your investments
The set of mixed macroeconomic data released in the first week of June led investors to take different directions in their portfolios where the demand for technology, this time led by Apple, allowed the S&P 500 and Nasdaq stock indexes to close last Thursday, once again at all-time highs. So far this year, the Dow is up +2.9%, while the S&P 500 and the Nasdaq have accumulated returns of +12.1% and 14.1%, respectively. Meanwhile, the 10-year sovereign yield decelerated slightly to 4.43% after the May unemployment rate rose to 4% (from 3.9%). However, the market once again corrected its expectations of a potential rate cut by incorporating a scenario in which the Federal Reserve's (Fed) monetary policy rate remains at 5.5% until the end of the third quarter once there is sufficient confidence to proceed with a cut without generating monetary confusion, a topic that we will address in greater detail below.
On the corporate front we had a strange intervention by Keith Gil (aka Roaring Kitty) who came out to defend his stock position in Gamestop through social networks despite the misalignment of its first quarter sales, allowing the stock to drop -39% last Friday, with a stony silence from the regulatory authorities unable to regulate the volatile behavior of the stock price.
This week the Federal Reserve (FED) will release its new macroeconomic projections for this and next year, publishing its estimates for the evolution of the monetary policy rate. For now, market agents estimate that the rate will remain at its current level until at least September, projecting a potential drop of only 25 basis points for the remainder of the year. The statement will be followed by a speech from Fed Chairman Jerome Powell, who will reiterate that we will have to wait for core inflation to continue its downward trend before adopting any new measures. On the corporate front, the market will be focused on the vote by Tesla shareholders on CEO Elon Musk's pay package this coming Thursday where the company could pay him US$55 billion agreed in 2018 in compensation.
Por ahora parecería que hay los votos están divididos, no obstante, de no concretarse la aprobación hay un riesgo de que Musk opte por dedicarse a muchos otros de sus proyectos en carpeta. Por ejemplo, esta semana pasada Space X logre el lanzamiento del cohete espacial más grande en la historia mientras que uno de sus cohetes reusables cumplió 300 misiones sin ningún problema. El alza en el precio de la acción de Apple hacia US$197 por acción vino en antelación a su convención de desarrolladores que se llevará a cabo a partir de hoy lunes. En ella se espera que la empresa presente algunos nuevos avances en inteligencia artificial. A su vez, desde hoy se ejecutará el stock split de Nvidia en 10:1 dándole a la empresa un mayor grado de liquidez. Finalmente, esta semana estarán reportando Adobe, Broadcom, Dave & Busters y Oracle entre otras.
For the FED the decision to hold the rate at 5.5% was made considerably easier in this issue because, as we commented earlier, although the unemployment rate rose marginally to 4%, job creation came in well above market expectations at 272k new jobs (with expectations of only 170k) while wage inflation climbed back up to 4.1% (from 4%). With this simple combination of mixed data the Fed will now have to wait for a combination of unison data to show that the economy is slowing and inflation continues to ease towards 2%. However, some have been counter-arguing that the Fed should consider another potential +25 basis point hike to avoid a de-anchoring of inflation expectations. But in this data churn there were two data related to the evolution of the economy that also generated a bifurcated path. On the one hand, the manufacturing ISM fell further into contractionary territory at 48.7 points (from 49.2 points) with a reading of 50 demarcating between an expansionary phase and a potential contraction. On the other hand, the services ISM reading registered a discretionary jump to 53.8 points (from 49.4 points) generating further dissonance.
This week, a couple of hours before the Fed's announcement, the previous month's inflation data will be published, where the headline reading is expected to remain at 3.4% for the second consecutive month, while the core figure, which excludes food and energy prices, will marginally drop to 3.5% (from 3.6%). Any data above inflation expectations could generate a slight adjustment in which market agents may begin to internalize that there will be no change in the rate, remaining at 5.5% for the rest of the year, and that only in 2025 will we see a gradual decline as long as inflation eases. There are two elements that we should monitor as part of this exercise which include:
The evolution of oil prices, which at the beginning of last week plummeted to close at US$75 per barrel.
The volatility that some exchange parities have been registering in recent days, such as the Brazilian real, which depreciated in relation to the dollar, reaching R$5.35, accumulating a depreciation of 10.2% so far this year.
It is to be expected that the FED will opt to reiterate the discourse of its last monetary policy meeting, leaving all doors open (both downward and upward) because what it cannot afford to do is to make the wrong decision and leave the market behind, which would end up taking its toll as on previous occasions when the decision was to adjust the interest rate downward with inflation upward.
In conclusion, the mixed macroeconomic data published in recent hours will keep the FED on hold for several more months, leaving the rate at 5.5% more than the market estimates.
THIS WEEK
Monday (June 10)
Quarterly Reports
Yext, Inc.
Calavo Growers, Inc.
Qudian Inc.
Skillsoft Corp.
Zedge, Inc.
Tuesday (June 11)
Quarterly Reports
Oracle Corporation
Woodside Energy Group Limited
Rubrik, Inc.
Lilium N.V.
Mesabi Trust
Economic Reports
Red Book Annual Change Report
Wednesday (June 12)
Quarterly Reports
Broadcom Inc.
Dave & Buster's Entertainment, Inc.
TDCX Inc.
Anterix Inc.
SunPower Corporation
Economic Reports
Monthly Change in Inflation Report
Annual Change in Inflation Report
Monthly Change in Core Inflation Report
Annual Change in Core Inflation Report
Fed interest rate change decision
Open Market Operations Committee economic projections
Thursday (June 13)
Quarterly Reports
Adobe Inc.
Autodesk, Inc.
RH
TORM plc
Korn Ferry
Economic Reports
Producer Price Index Report
Friday (June 14)
Quarterly Reports
Yiren Digital Ltd.
QIWI plc
CNFinance Holdings Limited
Aeries Technology, Inc.
Hanryu Holdings, Inc.
Economic Reports
Preliminary Consumer Sentiment Report, Michigan
Now you have more information about your investments. See you next week with more news.
For illustrative purposes only. Does not represent an investment recommendation. For more information, please see our Social Media Disclosure.