Traders Market Weekly: Avoid Whiplash, Fasten Your Seatbelts

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    Dow 37,815.92 -570.17 -1.49%
    S&P 500 5,035.69 -80.48 -1.57%
    Nasdaq 15,657.82 -325.26 -2.04%
    VIX 15.65 0.98 6.68%
    Gold 2,298.80 -4.10 -0.18%
    Oil 81.13 -0.80 -0.98%


    As expected FOMC makes NO CHANGES on INTEREST RATE % as meeting concludes
    STOCKS are popping a little higher … possibly all in GREEN soon
    KEY MESSAGE — ECONOMY + JOBS strong … INFLATION still a problem


    Dow 37,903.29 87.37 0.23%
    S&P 500 5,018.39 -17.30 -0.34%
    Nasdaq 15,605.48 -52.34 -0.33%
    VIX 15.43 -0.22 -1.41%
    Gold 2,318.20 15.30 0.66%
    Oil 79.10 -2.83 -3.45%


    Equity indices in the Asia-Pacific region ended Thursday on a mixed note while markets in China remained closed for Labor Day.
    Hong Kong’s Hang Seng: +2.5%,
    Japan’s Nikkei: -0.1%,
    China’s Shanghai Composite: HOLIDAY,
    India’s Sensex: +0.2%,
    South Korea’s Kospi: -0.3%,
    Australia’s ASX All Ordinaries: +0.2%.

    April Household Confidence 38.3 (expected 39.7; last 39.5)
    The Bank of Japan reportedly conducted another intervention yesterday when the yen rallied strongly against the dollar in the wake of the May FOMC Statement.

    South Korea
    April CPI 0.0% m/m (expected 0.2%; last 0.1%); 2.9% yr/yr (expected 3.0%; last 3.1%). Final April Manufacturing PMI 49.4 (last 49.8)

    final April Manufacturing PMI 58.8 (expected 59.5; last 59.1)

    Hong Kong
    Q1 GDP 2.3% qtr/qtr (expected 0.9%; last 0.4%); 2.7% yr/yr (expected 0.9%; last 4.3%)
    Property developers displayed continued strength in Hong Kong.

    March Building Approvals 1.9% m/m (expected 3.5%; last -0.9%); -2.5% yr/yr (expected 5.2%; last 4.9%)
    Private House Approvals 3.8% m/m (last 12.4%).
    March trade surplus AUD5.02 bln (expected surplus of AUD7.19 bln; last surplus of AUD6.59 bln).
    March Imports 4.2% m/m (last 4.5%) and Exports 0.1% m/m (last -3.2%)\

    Chinese imports to the U.S. may become more expensive since some members of President Biden’s party are pushing for higher tariffs.

    New Zealand
    March Building Consents -0.2% m/m (last 15.9%)


    Major European markets trade on a modestly higher note.
    STOXX Europe 600: +0.1%,
    Germany’s DAX: +0.2%,
    U.K.’s FTSE 100: +0.4%,
    France’s CAC 40: -0.6%,
    Italy’s FTSE MIB: +0.2%,
    Spain’s IBEX 35: +0.4%.
    France’s CAC (-0.6%) lags with Stellantis (-3.6%) seeing a continuation of its post-earnings weakness.
    Shell beat Q1 expectations and announced a $3.5 bln buyback

    Eurozone’s final April Manufacturing PMI 45.7 (expected 45.6; last 46.1)
    Germany’s final April Manufacturing PMI 42.5 (expected 42.2; last 41.9)
    France’s final April Manufacturing PMI 45.3 (expected 44.9; last 46.2)
    Italy’s final April Manufacturing PMI 47.3 (expected 50.3; last 50.4). March PPI -0.2% m/m (last -1.0%); -9.6% yr/yr (last -10.8%)
    Spain’s final April Manufacturing PMI 52.2 (expected 51.3; last 51.4)
    Swiss April PMI 41.4 (expected 45.5; last 45.2) March Retail Sales -0.1% yr/yr (expected 0.2%; last 0.2%). April CPI 0.3% m/m (expected 0.1%; last 0.0%); 1.4% yr/yr (expected 1.1%; last 1.0%).

    European Central Bank policymaker De Cos said that inflation is expected to reach the 2.0% target in 2025 after fluctuating for the remainder of this year.


    Weekly initial jobless claims totaled 208,000 (consensus 213,000) following a revised count of 208,000 last week (from 207,000). Continuing claims came in at 1.774 million following last week’s revised count of 1.774 million (from 1.781 million).

    Productivity rose 0.3% in the preliminary Q1 reading (consensus 0.8%) following a revised 3.5% increase in Q4 (from 3.2%). Unit labor costs rose 4.7% in the preliminary Q1 reading ( consensus 2.5%) following a flat reading in Q4 (revised from +0.4%).

    The trade deficit narrowed to $69.4 billion (consensus -$69.0 billion) from $69.5 billion in February (revised from $68.9 billion).


    Factory orders increased 1.6% month-over-month in March (consensus 1.60%) after increasing a revised 1.2% (from 1.4%) in February. Excluding transportation, factory orders increased 0.5% on the heels of a 1.1% increase in February. Shipments of manufactured goods were up 0.3% after increasing 1.4% in February.

    The key takeaway from the report is that there was a pickup in new orders in March for durable and nondurable goods, demonstrating that demand for manufactured goods has not fallen by the wayside.

    Treasury yields didn’t react much to the data.

    The 10-yr note yield was at 4.65% shortly before the release, but sits at 4.63%.


    Morning look:

    Dow 38078.24 +174.95 (0.46%)
    Nasdaq 15723.99 +118.51 (0.76%)
    SP 500 5039.70 +21.31 (0.42%)
    10-yr Note 0/32 4.633
    NYSE Adv 1903 Dec 775 Vol 197 mln
    Nasdaq Adv 2529 Dec 1472 Vol 1.6 bln

    Industry Watch
    Strong: Information Technology, Consumer Discretionary, Consumer Staples, Energy, Communication Services
    Weak: Materials, Financials, Health Care, Industrials

    Moving the Market

    — Strength in mega cap stocks
    — Semiconductor stocks also showing strength after QCOM earnings
    — Muted response to this morning’s economic releases

    — Relief that the Fed is not likely to raise rates after Fed Chair Powell’s press conference yesterday, yet ongoing uncertainty about how long rates will remain high


    Dow 38,225.66 322.37 0.85%
    S&P 500 5,064.20 45.81 0.91%
    Nasdaq 15,840.96 235.48 1.51%
    VIX 14.61 -0.78 -5.07%
    Gold 2,311.90 0.90 0.04%
    Oil 78.94 -0.06 -0.08%



    PIMCO co-founder Bill Gross: Look for 10-year yields to rise above 5% over the next 12 months

    The 80-year-old former Bond King released a rare investment outlook today where he warns against betting on falling Treasury yields, in large part due to larger US deficits.

    “Those that argue for lower rates have to counter the inexorable upward climb in Treasury supply and the likely Sisyphean decline in bond prices,” Gross writes. “Look for 5% plus 10-year yields over the next 12 months — not 4.0%.”

    He highlights that there is nearly $30 trillion in outstanding public debt issued by the Federal government and it’s growing at 10% per year.

    “The U.S. economy requires fiscal deficits and net increases in Treasury debt of 1-2 trillion or more annually in order for the economy to grow,” he writes.


    Bill Gross, the legendary bond and fixed income pioneer, has recently released a new Investment Outlook titled “They Just Wanna Sell You a Bond Fund” 1. In this outlook, he makes some interesting points about the bond market and Treasury yields.

    Total Return Concept:
    Bill Gross helped originate and popularize the concept of “total return” bond funds almost four decades ago.
    The idea was based on the observation that with rock-bottom durations (around 6-7 years) and a 15% yield on 30-year Treasuries, these investments could go up to 17.5% before investors would be in the red.
    However, the landscape has changed significantly. With 10-year yields bottoming at 53 basis points (near 0%) and durations now exceeding 20 years, the total return concept is no longer viable.
    Gross declares that “Total Return is dead” and advises investors not to fall for bond funds that promote this outdated approach.
    Treasury Yields and US Deficits:
    Gross warns against betting on falling Treasury yields.
    He points out the inexorable upward climb in Treasury supply, which puts pressure on yields.

    He predicts that 10-year yields will rise above 5% over the next 12 months, rather than staying at 4.0%
    US Debt and Economic Growth:Gross highlights the substantial outstanding public debt issued by the Federal government, which currently stands at nearly $30 trillion.
    He emphasizes that the US economy requires fiscal deficits and net increases in Treasury debt (1-2 trillion or more annually) for sustainable growth

    In summary, Bill Gross’s outlook suggests that investors should be cautious about bond funds and consider the changing dynamics of the bond market. His insights provide valuable context for understanding the current economic landscape 1. If you’d like to read the full text of his Investment Outlook, you can find it on his website here.1

    Remember that investment decisions should always be made based on thorough research and personalized financial advice. 😊


    AAON (AAON) misses by $0.02, misses on revs… AAON down 12.0%
    Apple (AAPL) beats by $0.02, reports revs in-line; iPhone revenue slightly below ests; raises dividend 4%; authorized $110 bln share repurchase program… AAPL up 7.1%
    Ardelyx (ARDX) beats by $0.04, beats on revs… ARDX up 12.1% (BBAI) reports Q1 (Mar) results, misses on revs; reaffirms FY24 revs guidance… BBAI down 19.8%
    Block (SQ) beats by $0.02, beats on revs, cash app revenue up 23%, raises FY24 adjusted EBITDA, gross profit, and adjusted operating income guidance… SQ up 7.0%
    Cloudflare (NET) beats by $0.03, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY24 EPS above consensus, reaffirms FY24 revs guidance… NET down 13.8%
    Coinbase Global (COIN) beats by $3.25, beats on revs; issues Q2 forecasts… COIN down 1.7%
    Expedia Group (EXPE) beats by $0.35, beats on revs; lowers FY24 revs below consensus… EXPE down 7.8%
    Fortinet (FTNT) beats by $0.05, beats on revs; guides Q2 EPS in-line, revs in-line; raises FY24 guidance… FTNT down 8.4%
    Opendoor Technologies (OPEN) beats by $0.05, beats on revs; guides Q2 revs in-line… OPEN up 10.6%
    Paylocity (PCTY) beats by $0.23, beats on revs; guides Q4 revs above consensus; approves $500 mln repurchase plan… PCTY up 10.3%
    Sprout Social (SPT) beats by $0.09, reports revs in-line; issues mixed Q2 guidance; raises FY24 EPS guide, lowers revs guide… SPT down 28.6%
    Trupanion (TRUP) beats by $0.03, beats on revs… TRUP down 13.8%


    Fair Value for Friday, May 3:

    S&P 500: 5,091
    Nasdaq 100: 17,647
    DJIA: 38,370


    MOTHER OF ALL REPORTS: The Labor Department data showed 175,000 jobs were created last month, missing economists’ estimates. Average hourly wages rose by 0.2%, a smaller jump than expected, which helped to ease investors’ inflation concerns. Meanwhile, the unemployment rate ticked higher to 3.9%



    Equity indices in the Asia-Pacific region ended the week on a mixed note.
    Japan’s Nikkei: HOLIDAY (+0.8% for the week),
    Hong Kong’s Hang Seng: +1.5% (+4.7% for the week),
    China’s Shanghai Composite: HOLIDAY (+0.5% for the week),
    India’s Sensex: -1.0% (+0.2% for the week),
    South Korea’s Kospi: -0.3% (+0.8% for the week),
    Australia’s ASX All Ordinaries: +0.6% (+0.8% for the week).

    Australia’s Services PMI expanded for the third consecutive month in the final reading for April.
    final April Services PMI 53.6 (expected 54.2; last 54.4)
    March Home Loans 2.8% m/m (expected 1.0%; last 1.5%)

    Singapore March Retail Sales -1.0% m/m (last 3.1%); 2.7% yr/yr (last 8.6%)

    Hong Kong
    March Retail Sales -7.0% yr/yr (last 1.9%)

    Markets in China remained closed for Labor Day and Japan’s Nikkei was closed for Constitution Day.

    Japanese yen continued rebounding against the dollar after falling to a fresh multi-decade low earlier this week.

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