North American News
S&P index closes just below the 4200 level
- Key target level for many traders
The major US stock indices are closing solidly higher with the NASDAQ index leading the way with a gain of 1.51%. The S&P index is also up strongly at 0.94% and is closing just below the 4200 level that many traders have as the high of a range. The index is closing just below that level at 4198.06.
We final numbers for the day are showing:
- Dow industrial average up 115.12 points or 0.34% at 33535.90
- S&P index up 39.28 points or 0.94% at 4198.06
- NASDAQ index up 188.26 points or 1.51% at 12688.83
- Russell 2000 rose 10.35 points or 0.58% at 174.85
The run into the major AI stocks continued:
- Nvidia up $14.99 or 4.97% to $316.77
- Alphabet up $2.01 or 1.66% to $122.85
- Microsoft was up $4.56 or 1.45% to $318.56
Other winners today included:
- Intel, +2.77%
- Netflix, +9.22%
- Snowflake +5.9%
- AMD +4.03%
- Uber, +3.74%
- Intuit, +3.66%
- Crowdstrike, +3.37%
US May Philly Fed -10.4 versus -19.8 expected
- US Philadelphia-area manufacturing survey data for May 2023
- Prior -31.3
- Philly Fed business index -10.4 versus -19.8 expected
- six-month index -10.3 versus -1.5 last month
- capital expenditures index 2.5 versus -5.4 last month
- employment index -8.6 versus -0.20 last month
- price paid index +10.90 versus +8.2 last month
- new orders index -8.9 versus -22.7 last month
US leading index for April -0.6% vs -0.6% expected
- US leading index for April 2023
- Prior month -1.2%
- The Conference Board Leading Economic Index® (LEI) for the U.S. fell by 0.6% in April 2023 to 107.5 (2016=100), following a 1.2% decrease in March.
- The LEI showed a 4.4% decline over the six-month period from October 2022 to April 2023, a sharper fall than the 3.8% contraction from April–October 2022.
- The Conference Board Coincident Economic Index® (CEI) for the U.S. rose by 0.3% in April 2023 to 110.2 (2016=100), after a 0.2% rise in March.
- The CEI showed a 0.7% increase over the six-month period from October 2022 to April 2023, which is a decrease from the 0.9% growth recorded over the prior six months.
- The Conference Board Lagging Economic Index® (LAG) for the U.S. decreased by 0.1% in April 2023 to 118.3 (2016 = 100), after staying constant in March.
- The LAG exhibited a 0.9% increase over the six-month period from October 2022 to April 2023, which is a significant decline from its previous six-month growth rate of 4.0%.
According to Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators at The Conference Board, the LEI for the US declined for the thirteenth consecutive month in April, signaling a worsening economic outlook. However, the weakness among the underlying components was less widespread compared to March’s reading, which resulted in a smaller decline. Despite minor improvements in stock prices and manufacturers’ new orders for both capital and consumer goods, the LEI continues to warn of an economic downturn. The Conference Board forecasts a contraction of economic activity starting in Q2, leading to a mild recession by mid-2023. Even as recent trends in manufacturing activity and industrial production have been weak, employment and income growth remain positive, reflecting the figures shown by the CEI.
US existing home sales for April 4.28M versus 4.30M estimate
- US existing home sales for April 2023
- Prior month 4.44M revised to 4.43M
- US existing home sales 4.28M vs 4.3M estimate
- Inventory of homes for sale at 1.04 million, up 1% from the year before
- 2.9 months of supply. Six-month is considered a balance market
- Existing home sales -3.4% versus -2.6% last month (revised from -2.4%)
- Home sales down over 23% year-over-year
- Realtors blaming the client on tight supply
- Median $388,800, -1.7 from April last year. The decline represents the biggest price decline since April 2012. Median prices, which aren’t seasonally adjusted, were down 6% from a record high of $413,800 in June.
- Higher in the Northeast and Midwest
- Prices fell in the South and West
US initial jobless claims 242K vs 254K estimate
- US initial jobless claims and continuing claims for the current week
- Initial jobless claims 242K versus 254K estimate
- 4-week MA of the initial jobless claims 244.25K versus 245.25K last month
- Continuing claims 1.799M vs 1.818M estimate. Last week 1.807M revise from 1.813M last week.
- 4-week moving average of the continuing claims was 1.813M vs 1.828M last week
Feds Logan: Data at this time does not support skipping rate hike at the next meeting
- Text from Fed’s Logan sends stocks lower and the US yields higher
- Data at this time does not support skipping a rate hike at the next meeting in June
- Data incoming weeks could yet show that it is appropriate to skip a meeting
- As of today, we are not there yet
- The Fed still has work to do in achieving its goal of price stability
- It is a long way from here to 2% inflation
- She pointed out that the core PCE price index ran a 4.9% annualized pace in the 1st quarter. That was higher than the 4.4 pace in the 4th quarter of 2022
- Keeping an open mind ahead of the meeting
- She is concerned about whether inflation is falling fast enough
- Says Fed has not made enough progress toward 2% target
- Inflation is much too hard
- Restoring price stability is critical priority
- Labor market has called economy which is less out of bounds
- Recognizes arguments against tightening policy too much or too fast
- Effect of banking stress affects so far is comparable to a 25 – 50 basis point Fed policy rate increase
- Every bank in the US it should be fully set up at Fed’s discount window and run regular tests
Feds Jefferson: inflation is too high. Impact of hikes not fully felt
- Fed’s Jefferson was speaking
Fed’s Jefferson was speaking and says:
- inflation is too high and by some measures progress is slowing, but a year is not long enough to feel the full effect of interest rate hikes so far
- Outlook is not for recession, but growth has slowed considerably
- Expect job growth to also decline and unemployment rate may rise
- Evidence so far points to only a modest incremental tightening of credit conditions to recent bank stress
- Remains uncertain how tighter credit will influence household and business spending
- Inflation in nonhousing services has shown no signs of a significant decline
- Will consider all these factors in deciding the appropriate stance on monetary policy
US 30 year mortgage rises to 6.39% from 6.35% last week
- According to Freddie Mac
Freddie Mac is out saying that the 30-year fixed rate mortgage rose to 6.39% from 6.35% in the prior week. Existing home sales this morning fell -3.4% to 4.28M annualized rate from 4.43M last month.
The problem in the housing is supply. The months supply of housing remains low at 2.9 months. It is largely thought that 6 month supply is more normal.
Feds Bullard: Higher rates are insurance against inflation. Leaning toward a June hike.
- 30% chance of no change in policy up from around 25% yesterday
St. Louis Fed Pres. James Bullard in a Financial Times interview is leaning toward a hike in June:
- higher rates are insurance against inflation
- he will keep an open mind going into June meeting but is inclined to another hike
- fall in treasury yields offsets banking sector tightening
- still believes rates are at the low end of sufficiently restrictive with the top and seen above 6%
- better and more prudent to be in the middle of the zone (i.e. 5.5% ish)
Commodities
Gold dives to $1,960, lowest since April amid sustained USD buying
- Gold price remains under heavy selling pressure on Thursday and drops to its lowest level since April.
- The USD jumps to a nearly two-month top and turns out to be a key factor weighing on the XAU/USD.
- The optimism over the US debt ceiling contributes to driving flows away from the safe-haven metal.
Gold price continues drifting lower for the third successive day on Thursday – also marking the sixth day of a negative move in the previous seven – and dives to its highest level since April 03 during the early North American session. The XAU/USD is currently placed around the $1,960-$1,961 region, down over 1% for the day, and seems poised to prolong its recent sharp retracement slide from the all-time high touched earlier this month.
A combination of supporting factors pushes the US Dollar (USD) to a nearly two-month high, which, in turn, is seen weighing heavily on the Gold price. Against the backdrop of the recent hawkish signals from several Federal Reserve (Fed) officials, the optimism over the potential lifting of the US debt ceiling remains supportive of the elevated US Treasury bond yields and acts as a tailwind for the Greenback. The intraday USD buying picks up pace following the release of the mostly upbeat US macro data, which showed that Initial Jobless Claims fell to 242K last week and the Philly Fed Manufacturing Index improved to -10.4 in May from -31.3 previous.
Adding to this, Dallas Fed President Lorie Logan said that the economic data points so far don’t justify skipping a rate increase at the central bank’s next meeting in June. This, in turn, reaffirms expectations that the US central bank will keep rates higher for longer and contributes to driving flows away from the non-yielding Gold price. Meanwhile, US President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach an agreement soon to raise the federal government’s $31.4 trillion debt ceiling. This helps calm market fears of an unprecedented American debt default and undermines the safe-haven metal.
Apart from this, the downfall could further be attributed to some technical selling following the overnight breakdown through the $1,980 horizontal support. A subsequent slide below the $1,970 level could be seen as a fresh trigger for bearish traders and might have already set the stage for a further near-term depreciating move. Hence, some follow-through decline towards the $1,950-$1,948 intermediate support, en route to the 100-day Simple Moving Average (SMA), currently pegged near the $1,925 area, looks like a distinct possibility.
Copper: Break above 8450 essential for denoting an extended bounce – SocGen
Strategists at Société Générale analyze Copper’s technical outlook.
Risk of a deeper pullback towards 7945 on failure to defend 8070
“Copper has revisited the potential support near 8090/8070 representing confluence of a multi-month trend line, the lower band of a steep channel and projections for the decline since January.” “Formation of a daily bullish engulfing denotes possibility of a rebound towards the channel upper limit near 8450. A cross above this is essential for denoting an extended bounce.”
“In the event Copper fails to defend 8070, there is risk of a deeper pullback towards 7945, the 61.8% retracement from July 2022 and 7810.”
WTI crude oil futures settle at $71.86
- Down $0.97 or 1.33%
WTI crude futures are selling at $71.86. That’s down $0.97 or -1.33%. The high-priced rate reached $72.97. The low price was $71.52.
EU News
European stock indices close higher. German DAX closes at a new 2023 high
- Major indices advance in trading today
The European stock indices are closing higher with he German Dax leading the way. That index is closing in a new 2023 hi and at the highest level going back to January 2022. The all-time high price reached 16290.19 in November 2021. The price today closed at 16163.37 just 137 points from that record level.
The final numbers are showing:
- German Dax +212.08 points or 1.33% at 16163.37
- Frances CAC +47.45 points or 0.64% at 7446.90
- UK’s FTSE 100 +19.07 points or 0.25% at 7742.29
- Spain’s Ibex plus 1.52.40.02 percent at 9213.11
- Italy’s FTSE MIB up 117 points or 0.43% at 27313.67
BOE’s Bailey: I do not envisage balance sheet returning to pre-financial crisis level
- Remarks by BOE governor, Andrew Bailey
- QT is not an active policy tightening instrument
- QT has some effect on the economy, but fairly small
ECB’s de Guindos: There is still scope to keep raising rates
- Remarks by ECB vice president, Luis de Guindos
- But most of the tightening has already been done
- Says does not know what the end point is going to be
Other News
Politico: McCarthy says he thinks an eventual debt bill needs to be on floor next week
- Politico reports on the debt ceiling
- We are not there. I see a path
- “I just believe where we were a week ago and where we are today is a much better place because we’ve got the right people in the room discussing it in a very professional manner with all the knowledge and all the background from all different leaders and what they want.”
WSJ Timiraos: Outlines debt limit impasse playbook
- What if? scenarios need to be understood.
The WSJs Timiraos, in an article outlines the “loathsome” playbook in the event of a Debt-ceiling standoff. The expectations are that we don’t get to that point but you never know.
Potential actions from the Fed include
- Buying Treasurys shunned by investors due to delayed payment risk or allowing banks to pledge defaulted securities as collateral for loans from the central bank.
- In 2011 the Fed plan involved managing government payments to prioritize principal and interest on government debt, allowing banks to count defaulted Treasurys toward their required capital buffers, and not penalizing banks facing a drop in capital ratios due to unusual cash demands.
Senate Majority Leader Schumer: Debt talks are moving forward
- Senate Majority Leader Schumer speaking
US Senate Majority Leader Schumer:
- Debt ceiling negotiations are making progress
- Senators should be ready to return to Washington within a 24-hour period during next week’s recess as debt ceiling talks move forward
Fed Insider Timiraos: Fed members suggest June rate rise will be a close call
- Timiraos sources comments from Logan and Jefferson
Fed insider/watcher from the WSJ Nick Timiraos is out with an article outlining comments from Fed to Logan from this morning where she said “We aren’t there yet”
Cryptocurrency News
CFTC Chair says DeFi crypto exchanges can be regulated, here’s the good, the bad and the ugly of regulation
- Commodities Future Trading Commission’s Chair Rostin Behnam says DeFi crypto exchanges can be regulated by US law.
- Behnam believes a cryptocurrency may be launched as a security and later devolve into a cash substitute when traded on a decentralized exchange.
- CFTC’s treatment of crypto assets as cash substitutes when traded on DEXes could fuel a rally in native tokens of decentralized exchanges.
Rostin Behnam, Chair of the US Commodities Future Trading Commission (CFTC), believes cryptocurrencies and decentralized exchanges (DEXes) can be regulated with the existing legal precedents. The Chair of the independent US federal agency commented on an undecided area of law around crypto, the question of whether a token can be treated as a security at its launch and as a cash substitute when traded on decentralized exchanges.
Behnam’s comments on crypto regulation could make users turn to decentralized exchanges to trade cryptocurrencies, given they could be treated as non-securities by US law.
CFTC Chair comments on DeFi, opens doors of opportunity for DEXes
The Chair of the CFTC slams comments like DeFi (decentralized finance) and decentralized exchanges cannot be regulated for lack of human involvement or assets just being “lines of code.” Behnam argues that based on what US customers are being offered and who the assets are being exposed to, who is the entity offering these products, crypto and exchange platforms can be regulated.
Behnam’s most interesting take was that the one area where crypto could be lightly regulated is decentralized exchanges where crypto assets might be treated as cash substitutes, but this remains an open question. The CFTC does not regulate cash markets and has limited authority to police such markets for fraud or manipulation.
He added that as digital assets hold unique characteristics, they will demand a unique set of policy ideas.
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