North American News
Major indices mixed after FOMC hawkish pause
The FOMC kept rates unchanged but the dot plot forecasts 50 basis point hikes between now and the end of the year.
The initial reaction was to the downside in stocks,
- Dow Industrial Average was down -428.58 points at the lows
- S&P index was down -31.17 points at the lows
- NASDAQ index was down -117.33 points at the lows
by the close, the indices had rebounded. The final numbers are showing:
- Dow industrial average fell -232.79 points or -0.68% at 33979.32
- S&P index rose 3.50 points or 0.08% at 4372.52
- NASDAQ index rose 53.15 points or 0.39% at 13626.47
Tesla shares did snap its 13 day win streak. The stock price fell -0.74%. Delta Air Lines extended its streak to 14 days. It shares rose 1.52%
Looking at some other stocks
- Nvidia rose $19.75 or 4.81%
- Intel rose $1.67 or 4.92%
- Unity software, which Apple cited as a software provider for its VR initiative, search by $2.45 or 6.35%
- Oracle which announced earnings this week rose 4.75%
- Broadcom rose 4.26%
- Nike rose by 5.67%
- Shake Shack rose by 3.74%
On the negative side,
- UnitedHealth was a huge drag on Dow industrial average falling by -6.36%
Tomorrow after the close Adobe will announce the earnings. It’s shares rose by $0.54 or 0.11% today. Since the May 12 low, the price is up 44.32% on AI initiatives.
FOMC dot plot and central tendencies from the June 2023 meeting. EOY 2023 rate 5.6%
- The dot plot for 2023 shows the end-of-year terminal target rate of 5.6% (vs 5.1% in March 2023)
- The FOMC dot plot for May 2023 show the median rate at the end of 2023 at 5.6% versus 5.1% in March 2023
- For 2024, the median fed funds target rate is 4.6% vs 4.3% in March
- For 2025, the median fed funds target rate is 3.4% vs 3.1% in March
The table central tendencies from June 2023 shows:
US May PPI final demand 1.1% % versus 1.5% expected
- US PPI data for May 2023
- Prior month 2.3% year on year and 0.2% month-to-month
- Final Demand Year over Year (YoY) 1.1% versus 1.5% expected. Lowest level since December 2020.
- Final Demand Month over Month (MoM) -0.3% % versus -0.1% expected
- Ex Food and Energy YoY 2.8% versus 2.9% expected
- ExFood and Energy MoM 0.2% versus 0.2% expected
- Ex Food, Energy, and Trade YoY 2.8% versus 3.3% last month (revised from 3.4%)
- Ex Food, Energy, and Trade MoM 0.0% versus 0.1% last month (revised from 0.2%)
Added details:
- Final demand goods fell -1.6%: The 1.6% decline in May, the largest since July 2022, was primarily driven by a 6.8% drop in the index for final demand energy. Prices for final demand foods decreased by 1.3%, while the index for final demand goods less foods and energy increased by 0.1%.
- Product detail: 60% of the May decline in the final demand goods index can be attributed to a 13.8% drop in gasoline prices. Diesel fuel, chicken eggs, jet fuel, fresh and dry vegetables, and iron and steel scrap indexes also fell. On the other hand, tobacco product prices increased by 1.7%, and electric power and beverage material indexes also saw increases.
- Final demand services rose 0.2%: This index increased by 0.2% in May, following a 0.3% increase in April. Leading this increase were margins for final demand trade services, which rose by 1.0%. Prices for final demand services less trade, transportation, and warehousing edged up 0.1%. However, the index for final demand transportation and warehousing services declined by 1.4%.
- Product detail: Over 40% of the May increase in prices for final demand services was due to a 4.2% rise in margins for automobile and automobile parts retailing. Other indexes that advanced include fuels and lubricants retailing, apparel retailing, securities brokerage, and machinery and vehicle wholesaling. However, truck transportation of freight prices fell 2.1%, and portfolio management and health, beauty, and optical goods retailing indexes also decreased.
Powell opening statement: Since last year, we have significantly raised interest rates
- Highlights from Fed Chairman Jerome Powell’s press conference
- The full effects of our policy have yet to be felt
- Nearly all policymakers view some further rate hikes this year as appropriate
- The labor market remains very tight
- Inflation has moderated somewhat since the middle of last year
- Inflation still has a long way to go
- If the economy evolves as expected, the median of participants sees 5.6% fed funds target at year-end
- We will continue to make our decisions meeting-by-meeting
Powell Q&A: It seemed to make obvious sense to use to moderate pace of hikes
Powell explained that it seemed like a ‘natural’ evolution of policy to switch to a slower pace of hiking as they reach the final destination. However we didn’t talk about doing an ‘every other meeting’ approach.
- We didn’t make a decision about July
- I do expect July will be a live meeting
- Data came in ‘consistent with, but on the high side’ of expectations
- Any forecast about inflation coming down this year will contain a big dose of housing disinflation
- Housing services disinflation will be a little slower than we would have expected
- We have seen some loosening of labor market conditions
- The conditions we need to see in place to get inflation down are coming into place, including lower growth and labor slack
- It’s common sense to go a bit slower as we near the destination
- We don’t know the full extent of the banking turmoil
- I can’t tell you that we ever have a lot of confidence that we can see where the Fed funds rate will be far in advance
- Inflation risks are still to the upside
- We’re not seeing a lot of progress on core PCE
- We want to see core PCE moving down decisively
- Says Fed watching housing carefully
- There is a path to getting inflation back to 2% without a sharp rise in employment
Nvidia trades to a new all-time high. AI euphoria continues
- New all-time high of $427.00.
Shares of Nvidia has reached a new all-time high of $427.00.That took out the high price from May 30 at $419.38.
US MBA mortgage applications W.E. 9 June +7.2% vs -1.4% prior
- Latest data from the Mortgage Bankers Association for the week ending 9 June 2023
- Prior -1.4%
- Market index 208.8 vs 194.7 prior
- Purchase index 163.2 vs 151.7 prior
- Refinance index 434.1 vs 409.7 prior
- 30-year mortgage rate 6.77% vs 6.81%
Commodities
Gold tumbles toward $1,940 on Fed hawkish skip
- Federal Reserve keeps rates unchanged at 5.00-5.25%.
- Dot plot shows a higher peak policy rate.
- US Dollar rises across the board, Gold tumbles as US yields soar.
Gold Price tumbled after the Federal Reserve kept interest rates unchanged for the first time after raising rates for ten consecutive meetings. Gold dropped from $1,952 to the $1,940 area.
As mostly expected, the Fed kept the Fed funds target range at 5.00-5.25. The “skip” is seen as hawkish considering that the economic projections from the FOMC staff show the peak rate a bit higher.
Natural Gas price retains upside on supply concerns post-FOMC
- Natural Gas rises as analysts fear supply shortages and hotter weather over the summer.
- US Dollar reverses after June FOMC meeting despite Fed not hiking, as Fed officials signal more hikes may be on the horizon.
- The technical picture is still long-term bearish, although price action throughout most of 2023 has been broadly sideways.
Natural Gas price is trading almost 1% higher on Wednesday as traders fret about possible supply constraints pushing prices up over the summer. Forecasts of hotter weather and supply outages at key fields in Norway – despite robust storage figures – are having the effect of pushing up Natural Gas prices.
US weekly crude oil inventories +7919K vs -510K expected
- Weekly petroleum inventories from the US EIA
- Prior was -451K
- Gasoline +2108K vs +316K expected
- Distillates +2123 vs +1208K expected
- Refinery utilization -2.1% vs +0.1% expected
- SPR draw of 1.9 million barrels
Private oil inventories released late yesterday:
- Crude +1024K
- Gasoline +2075K
- Distillates +1394K
JP Morgan slashes Brent crude forecast for the year to $81 from $90 previously
- Another hit to confidence for the oil market?
As a reminder, oil prices took a hit after Goldman’s revised forecast, with WTI crude hitting a low of $66.85 earlier this week before rebounding off its 200-week moving average to just above $70 at the moment.
Energy transition to limit oil demand growth from this year onwards – IEA
- A weaker global economy will also weigh on the outlook
- The shift to a clean energy economy is picking up pace
- A peak in global oil demand is in sight before the end of this decade
- Global oil demand will grow by 2.4 mil bpd this year, to a record 102.3 mil bpd
- That is helped by growth from the post-pandemic recovery, which is set to end this year
- 2024 will mark the end of the post-pandemic demand recovery
- Expects annual oil demand growth to slump to 400k bpd by 2028
EU News
Eurpean equity close: Strong gains ahead of the FOMC decision
- Closing changes for the main European bourses
- Stoxx 600 +0.5%
- UK FTSE 100 +0.2%
- French CAC +0.6%
- German DAX +0.5%
- Italy MIB +0.9%
- Spain IBEX +1.2%
Eurozone April industrial production +1.0% vs +0.8% m/m expected
- Latest data released by Eurostat – 14 June 2023
- Prior -4.1%; revised to -3.8%
- Industrial production +0.2% vs +0.8% y/y expected
- Prior -1.4%
Germany May wholesale price index -1.1% vs -0.4% m/m prior
- Latest data released by Destatis – 14 June 2023
- Prior -0.4%
- Wholesale price index -2.6% y/y
- Prior -0.5%
UK April monthly GDP +0.2% vs +0.2% m/m expected
- Latest data released by ONS – 14 June 2023
- Prior -0.3%
- GDP +0.5% vs +0.5% y/y expected
- Prior +0.3%
Other News
China has been holding ‘urgent’ meeting with business leaders on boosting growth
- Report out earlier on China stimulus
Earlier today, Bloomberg reported that Chian has convened ‘urgent’ meetings on the economy with business leaders on how to revitalize the economy.
Meeting attendees characterized “an “unusually urgent” tone in the meetings, which were described by “people present”.
There was a consensus among high-level government officials and some 10 people present at one meeting about two weeks ago that more and better-coordinated monetary and fiscal stimulus is needed, according to one participant. All those present shared pressing concerns over the ambiguity of the timing and form of any stimulus, the person said
Doubleline’s Gundlach says Stock market is showing signs of a mania
Jeffrey Gundlach was interviewed on CNBC, and had some pithy hot takes:
- The stock market, frankly, is exhibiting signs of a mania
- To call this a new bull market is really pushing it.
- Calls the FOMC decision a “hawkish pause”
- Don’t think the Fed will continue to hike
- Real economic indicators look really bad
- Fed is overstating inflation risk at this time
- If the Fed follows its stated path, it may break something
- S&P 500 is ‘really overvalued’
Cryptocurrency News
XRP price settles above $0.50, wiping out gains from Hinman documents release
- XRP price pulled back on Wednesday, trading at $0.5032 on Binance, as the boost from the public release of Hinman emails faded.
- SEC’s Former Director of Corporation Finance didn’t consider Ethereum a security, according to the contents of the email.
- Experts say the Hinman documents strengthen Ripple’s defense against the US financial regulator.
The release of the Hinman documents, a key element of Ripple’s defense against the Securities and Exchange Commission (SEC), led to a temporary bounce in XRP price but the initial euphoria faded on Wednesday even as many experts consider that the documents could help the payment giant in its lawsuit with the US financial regulator.
The contents of the documents published Tuesday reveal that in 2018 the regulator did not consider “token lockups” as indicative of securities.This is relevant and useful for other crypto assets defending themselves against SEC’s labeling of their tokens as “securities.”
Email exchanges between William Hinman and SEC officials reveal that the former Director of Corporation Finance did not consider Ether a security, and this was more than a “personal opinion” as other executives at the SEC have exchanged communication related to the matter.
The outcome of the case has a direct impact on XRP price and could have implications for the overall cryptocurrency community, so the altcoin’s holders are closely following the updates about the legal battle.
Follow our recently launched pages. Join our community and never miss a beat in the dynamic world of trading.
https://www.facebook.com/BilalsTechLtd
https://www.linkedin.com/company/bilals-tech/
