Round up of today's market news *

Wall Street Stumbles as Market Rally Falters

Major US stock indices are all closing lower led by the Dow Industrial Average which which fell -0.51%.

The final numbers are showing:

Dow Industrial Average average -201.97 points or -0.51% at 39671.03
S&P index -14.40 points or -0.27% at 5307.02
NASDAQ index -31.08 points or -0.18% at 16801.54

The small-cap Russell 2000 fell -16.64 points or -0.79% at 2081.70.

Snowflake reported EPS lower than expectations by revenues higher:

EPS $0.14 versus expected $0.18
Revenues $0.83 billion versus expected $0.79 billion
Shares are trading up 9.15% in after-hours trading

Nvidia earnings beat. Announces 10:1 stock split

Announce dividend increase

Nvidia earnings:

EPS $6.12 versus $5.57
Revenues $26.04 billion versus $24.57 billion
Announced 10 for 1 stop split for close on June 6
Data center revenues $22.6 billion versus $21.32 billion expected

Forward guidance of $28 billion versus $26.8 billion expected.
Dividend is raised 150% to one cent per share on a post stop split basis

Gross margins 78.9% versus 77% expected.

U.S. Treasury auctions off $16 billion at a high yield of 4.635%

WI level at the time of the auction 4.637%

High yield:4.635%
WI level at the time of the auction: 4.637%
Tail -0.2 basis points versus six month average of 0.0 basis points
Bid to Cover: 2.51X versus six month average of 2.61X
DIrects (a measure of domestic demand): 19.18 %versus six month average of 18.5%
Indirects (a measure of international demand): 70.76 % versus six with average of 68.3%
Dealers:10.1% versus six month average of 13.2%

Fed Minutes:Will take longer than anticipated to gain greater confidence in inflation fall

Participants at Fed’s April 30-May 1 meeting assessed it would take longer than previously anticipated to gain greater confidence in inflation moving sustainably to 2% – minutes
Various participants mentioned willingness to tighten policy further should risks to outlook materialize and make such action appropriate
Many participants commented on their uncertainty about the degree of policy restrictiveness
Participants remarked future policy path would depend on incoming data, the evolving outlook, and the balance of risks
Almost all participants supported decision to begin to slow pace of decline of central bank’s securities holdings; a few could have supported continuation of current pace
A couple of participants said it would be useful to begin discussions of appropriate longer-run maturity composition of Fed’s portfolio
Participants noted recent data had not increased confidence in progress toward 2% inflation goal and suggested disinflation process would take longer than previously thought
Fed staff’s economic projection was similar to March outlook, but noted that deteriorating household financial positions, especially for lower-income households, might prove to be a bigger drag on activity than anticipated

Many, Several, A few, A couple. References to the number of participants in Fed Minutes

References that include “MANY PARTICIPANTS”

Many participants commented that the better balance between labor demand and supply had contributed to an easing of nominal wage pressures.

Many participants commented that ongoing increases in productivity growth would support disinflation if sustained, though the outlook for productivity growth was regarded as uncertain.
Many participants noted signs that the finances of low- and moderate-income households were increasingly coming under pressure, which these participants saw as a downside risk to the outlook for consumption.
Many participants commented that the public appeared to have a good understanding of the Committee’s data-dependent approach in formulating monetary policy and its commitment to achieving its dual-mandate goals of maximum employment and price stability.
Many participants noted that, during the past year, labor supply had been boosted by increased labor force participation rates as well as by immigration.
Many participants commented on their uncertainty about the degree of policy restrictiveness.
Many participants noted that the better balance between labor demand and supply had contributed to an easing of nominal wage pressures.

References that include SEVERAL PARTICIPANTS

Several participants commented that growth of aggregate demand would likely have to slow from its strong pace in recent quarters for inflation to move sustainably toward the Committee’s goal.
Several participants stated that core nonhousing services price inflation could resume its decline as wage growth slows further with labor demand and supply moving into better balance, aided by higher labor force participation and strong immigration flows.
Several participants commented that increased efficiencies and technological innovations could raise productivity growth on a sustained basis, which might allow the economy to grow faster without raising inflation.
Several participants commented that increased efficiencies and technological innovations could raise productivity growth on a sustained basis, which might allow the economy to grow faster without raising inflation.
Several participants commented that increased efficiencies and technological innovations could raise productivity growth on a sustained basis, which might allow the economy to grow faster without raising inflation.
Several participants commented that growth of aggregate demand would likely have to slow from its strong pace in recent quarters for inflation to move sustainably toward the Committee’s goal.
Several participants commented that the existing redemption cap on agency debt and agency MBS was unlikely to bind at any point over the coming years, but the decision to reinvest any principal payments above that cap into Treasury securities was consistent with the Committee’s longer-run intention to hold a portfolio that consists primarily of Treasury securities.
Several participants commented that increased efficiencies and technological innovations could raise productivity growth on a sustained basis, which might allow the economy to grow faster without raising inflation.
Several participants commented that growth of aggregate demand would likely have to slow from its strong pace in recent quarters for inflation to move sustainably toward the Committee’s goal.
Several participants commented that increased efficiencies and technological innovations could raise productivity growth on a sustained basis, which might allow the economy to grow faster without raising inflation.
Several participants commented that growth of aggregate demand would likely have to slow from its strong pace in recent quarters for inflation to move sustainably toward the Committee’s goal.

References that include “A FEW PARTICIPANTS”

A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation.
A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation.
A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation.
A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation.
A few participants remarked that unusually large seasonal patterns could have contributed to January’s large increase in PCE inflation.
A few participants noted that government spending was supporting business expansion in their Districts.
A few participants commented that higher productivity growth might be sustained by the incorporation of technologies such as artificial intelligence into existing business operations or by high rates of new business formation in the technology sector.
A few participants noted that government spending was supporting business expansion in their Districts.
A few participants commented that higher productivity growth might be sustained by the incorporation of technologies such as artificial intelligence into existing business operations or by high rates of new business formation in the technology sector.
A few participants noted that government spending was supporting business expansion in their Districts.
A few participants commented that higher productivity growth might be sustained by the incorporation of technologies such as artificial intelligence into existing business operations or by high rates of new business formation in the technology sector.

References that include “A COUPLE”

A couple of participants noted that financial conditions appeared favorable for wealthier households, which account for a large portion of aggregate consumption, with hefty wealth gains resulting from recent equity and house price increases.

A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.
A couple of participants noted that financial conditions appeared favorable for wealthier households, which account for a large portion of aggregate consumption, with hefty wealth gains resulting from recent equity and house price increases.
A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.
A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.

A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.
A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.
A couple of participants remarked that negotiated compensation agreements had added to wage pressures in their Districts.

US existing home sales for April 4.14M versus 4.21M estimate

Details of US existing home sales for April 2024

Prior month 4.19M revised to 4.22M
Existing home sales for April 4.14M versus 4.21M estimate. Weaker than expectations
Existing home sales are down -1.9% on the month
month supply 3.5 months versus 3.2 months last month
30-year mortgage rate 7.05%
Supply of home price over $1 million up 40% year-over-year
Median home price $407,600 up 5.7%. Record high
First-time buyers 33% versus 29% last year
All cash sales 28%

US MBA mortgage applications w.e. 17 May +1.9% vs +0.5% prior

Latest data from the Mortgage Bankers Association for the week ending 17 May 2024

Prior +0.5%
Market index 201.9 vs 198.1 prior
Purchase index 140.0 vs 141.7 prior
Refinance index 536.9 v 499.9 prior
30-year mortgage rate 7.01% vs 7.08% prior

Goldman Sachs CEO David Solomon: See zero Fed cuts in 2024

Goldman Sachs CEO Solomon speaking

Sees zero fed cuts in 2024
The US economy in a slightly more fragile places than soft landing
Says government spending, AI investment dampening impact of higher rates on US economy
Sees global economic environment as slow and sluggish.

Goldman Sachs wary of being short US dollars

A summary of Goldman Sachs, main points:

Market Dynamics: Recent data and Federal Reserve actions have blurred the clear divergence in monetary policy that had previously supported a bearish USD outlook.
Carry Trade Interest: There is a renewed interest in carry trades, indicating a shift in market sentiment towards holding currencies with higher yields.
Strategists’ View: Goldman Sachs strategists see limited potential for further pressing USD shorts, given the current market conditions.
Trading Position: The current positioning in various currency pairs makes it challenging to recommend initiating new USD shorts.

WH Nat. Security Advisor Sullivan: US has seen targeted, limited Israel operations in Gaza

Geopolitical news

WH National Security Advisor Sullivan is on the wire saying:

US has seen targeted, limited Israeli operations in Gaza
He was briefed on Israeli plans to minimize civilian harm in Rafah during weekend visit to region
Biden believes two state solutions is the best way to bring about long term stability
Each country is entitled to makes its own determinations on recognizing Palestine
Biden believes direct negotiations through the parties is best route on Palestinian state
US believes it is wrong for Israel to withhold funds from West Bank

49% of polled American believe the S&P is down this year

Perceptions and misconceptions about the economy in the US.

The Guardian released an “exclusive Harris Poll” showing some interesting results out of the US.

According to the polling, nearly three in five Americans wrongly believe the US is in an economic recession with the majority – nearly 50% – also believe the S&P index is down on the year.

Some of the perceptions/misconceptions..

Perception of Economic Shrinking and Recession:

55% believe the economy is shrinking.
56% think the US is in a recession.
Misconception: GDP has been growing, not shrinking.

Stock Market Misunderstanding:

49% believe the S&P 500 index is down for the year.
Reality: The S&P 500 increased about 24% in 2023 and is up more than 12% this year.

Unemployment Rate Misconception:

49% believe unemployment is at a 50-year high.
Reality: The unemployment rate has been under 4%, near a 50-year low.

Blame on Biden Administration:

58% blame the Biden administration for the perceived worsening economy.

Inflation Perception:

72% think inflation is increasing.
Reality: Inflation is rising, but the inflation rate has significantly decreased from the post-Covid peak of 9.1%, now fluctuating between 3% and 4%.

Gold drops under $2,400 amid hawkish Fed minutes and trader sell-off

Gold trades down more than 1% after hitting a high of $2,426.
Wall Street Journal reports central banks in emerging markets added 2,200 tons of Gold since Q3 2022, driven by Western sanctions on Russia.
Fed minutes reveal willingness to tighten policy further if economic risks materialize.

Gold plunged during the North American session on Wednesday, breaching below the $2,400 barrier, as traders seem to have booked profits ahead of the release of the last Fed Meeting Minutes. Data from the US showed the housing market continued to show weakness, while Fed officials remained home after a busy week’s start.

The yellow metal trades at $2,392, losing more than 1% after reaching a high of $2,426.US Treasury bond yields are rising following a hotter-than-expected inflation report from the UK, sending US yields higher.US equities are mixed ahead of NVIDIA’s earnings report release, while the Greenback edges up.

In the meantime, an article by The Wall Street Journal mentioned that Gold rallied due to central bank buying.According to the World Gold Council, central banks in emerging markets added around 2,200 tons of the golden metal since Q3 2022.

Gold price falls as US yields climbed following hawkish Fed Minutes

Gold prices tumble sharply as the Greenback advances. The US Dollar Index, which tracks the Greenback’s performance against a basket of six other currencies, is up 0.19% at 104.82, a headwind for gold.
The FOMC Minutes showed that Fed officials remained uncertain about the degree of policy restrictiveness. They added that “it would take longer than previously anticipated to gain greater confidence in inflation moving sustainably to 2%.”
During the week, speeches by Fed officials laid the ground for the “hawkish tilt” of the FOMC’s Minutes, as most officials commented they would like to be certain that inflation is edging down and that they’re not in a rush to lower the fed funds rate.
Data from the Chicago Board of Trade shows investors are expecting 31 basis points of Fed easing toward the end of the year.

Crude oil inventory inventory build up of 1.825M versus a drawdown of -2.547M estimate

Crude oil inventory for the week of May 17

Crude oil showed a build of 1.825M versus -2.547M estimate. Private data did show a build of 2.48 million
Gasoline showed a drawdown of -0.945M versus -0.729M estimate. Private data showed a build of 2.088 million
Distilates showed a build of 0.379M versus -0.394M estimate . Private data showed a drawdown of -320,000
Cushing showed a build of 1.325M versus last week’s drawdown of -0.341M. Private data showed a build of 1.77M
refining utilization 1.3% versus expected 0.5%. Last week +1.9%.
Crude production 13.1 million barrels versus 13.1 million barrels last week

Copper rally faces up against another key momentum test

Copper futures are stalling as price is unable to firmly hold a break above $5 per pound

It’s tough to not be bullish on copper against the backdrop of the green energy transition.The story has been there for a while now. But timing is everything when it comes to trading and in the case of copper, it is finally starting to come into the spotlight. In April, copper rallied by 13% and is following that up with another 11% rally so far in May. But is the surging rally starting to run out of steam?

After having touched above $5 per pound for the first time last week, copper futures settled just under that for a while. That before a run higher again earlier this week to a fresh record high. But as seen above, there are some technical challenges presenting itself for copper at the moment.

The latest retreat today is moving back towards a test of its 100-hour moving average. And a break below that will see the near-term bullish bias turn more neutral instead. And a fall back below $5 will also be a setback to the recent buying momentum in general.

EU News

European shares close lower on the day

Down for the 2nd consecutive day

Major European indices are closing lower for the day and lower for the second consecutive day.

A snapshot of the closing levels shows:

German DAX, -0.25%
France CAC, -0.61%
UK FTSE 100 -0.55%
Spain’s Ibex -0.05%
Italy’s FTSE MIB, -0.41%

With more than 1/2 of the week over, the major indices are lower:

German DAX is down -0.13%
France CAC is down -0.97%
UK FTSE 100 under his down -0.59%
Spain’s Ibex is unchanged
Italy’s FTSE MIB is down -2.65%

UK April CPI +2.3% vs +2.1% y/y expected

Latest data released by ONS – 22 May 2024

Prior +3.2%
Core CPI +3.9% vs +3.6% y/y expected
Prior +4.2%

On the month itself, headline inflation was seen up 0.3% (vs 0.2% expected) and core inflation up 0.9% (vs 0.7% expected).But the annual readings reflect higher estimates than expected. That said, they are still lower than in March owing to Ofgem lowering the energy price cap by 12% starting from April.The impact of that is a hard one to gauge but I reckon traders will take this as being stickier inflation, especially with annual services inflation seen at 5.9% (vs 5.5% expected).

ECBs’s Schnabel: If data confirms outlook, June cut is likely

ECBs Schnabel speaking

If data confirms Outlook, June cut likely.
Sees slight revival in the euro area economy
Inflation likely return to 2% without recession

UK’s Sunak calls a national election on July 4 as per earlier reports

It is official. The UK people will be going to the poll on US Indepence Day

Economic instability is only the beginning. Question now is who do you trust
Says… Now is the moment for Britain to choose
Spoke with the King and has announced the general election will be held on July 4
Uncertain times call for clear plan and bold action.
I will not claim we’ve got everything right
I am proud of what we achieved together.
I am guided by doing what is right, not what is easy
I will fight for every vote and earn your trust.
We won’t put economic stability at risk

Barclays no longer sees the BOE cutting rates in June

The firm had previously penciled in the first rate cut for next month

They surely won’t be the last to do that.

Asia-Pacific-World News

Trading in China’s first batch of ultra-long bonds suspended due to 13% price jump

These are trading on the Shanghai Stock Exchange

These are the bonds to fund spending to support Chinese economic growth.

China announces countermeasures against 12 US companies and their senior executives

This will include freezing movable, immovable, and other types of asses in China

Among them, Lockheed Martin will see a few units impacted. The Chinese foreign ministry also says that it will not issue visas and there will be bans imposed for their senior executives from entering China. The measures will go into place from 22 May.

UK expect doing business in China to become harder over the next five years

British Chamber of Commerce in China says China’s 48 measures to restore confidence fall short

China is trying to stem the flow of capital out of the country. It has ushered in 48 measures since August 2023 to restore investor confidence.

The British Chamber of Commerce in China said these fell short of “meaningful opening up” and that geopolitical tensions weighed heavy on the minds of UK investors.

The report comes via Reuters.

“British companies are yet to see government measures translate into ‘meaningful opening up’, with an anticipation that regulatory obstacles will increase rather than decrease in the next five years,” the chamber said. “British business confidence is further constrained by growing risk of increased trade tensions due to a complex geopolitical environment,” it added.

China considers slapping higher tariffs on some imported cars

The Global Times (Chinese tabloid) cites a ‘Chinese auto industry insider’

Overnight in China’s Global Times, citing a Chinese auto industry insider:

China should consider raising the temporary tariff rate on imported cars with large-displacement engines
Part of broader efforts to cut emissions and promote the green development of the auto industry

The Times added:

auto industry insider … while slamming protectionist moves taken by certain countries and regions against Chinese electric vehicles (EVs)

The insider is :

The suggestionn for increased temporary tariff rate on imports of vehicles with engines larger than 2.5 liters was made by Liu Bin, chief expert of China Automotive Technology & Research Center and deputy director of China Automotive Strategy and Policy Research Center

PBOC sets USD/ CNY mid-point today at 7.1077 (vs. estimate at 7.2376)

PBOC CNY reference rate setting for the trading session ahead

PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%

2bn mature today
thus neutral in OMOs today

RBNZ Orr: Expect inflation to fall back into target band by end 2024

Reserve Bank of New Zealand Monetary Policy Statement media conference

Governor Orr speaking at the Reserve Bank of New Zealand Monetary Policy Statement media conference.

will take time for domestic inflation to decline
economy has lower potential growth rate, unsure if that is temporary
have limited upside room for inflation surprises
pleased that inflation expectations are falling, need to fall further
OCR track is a central projections, not an absolute predicition

Reserve Bank of New Zealand leaves cash rate on hold at 5.5%, as widely expected

RBNZ says policy needs to be restrictive

The Bank sees the cash rate ahead at:

5.61% in September 2024 (prior 5.6%)
5.54% in June 2025 (prior 5.33%)
5.4% in September 2025 (prior 5.15%)
2.99% in June 2027

That 5.4% in September 2025 is a full 25bp higher than its previous forecast.

Forecasts inflation at 2.6% y/y by June 2025.

Statement:

Monetary policy needs to be restricted
Restrictive monetary policy has reduced capacity pressures in the New Zealand economy and lowered consumer price inflation
Annual consumerprice inflation is expected to return to within the committee’s 1 to3 percent target range by the end of 2024.
Welcome decline ininflation in part reflects lower inflation for goods and servicesimported into New Zealand
Components of domestic services inflation persists
Wage growth and domestic spending are easing
Weaker capacitypressures and an easing labour market are reducing domestic inflation

Minutes:

Members agreed they remain confident that monetary policy is restricting demand
A further decline in capacity pressure is expected, supporting a continued decline in inflation
Committee agreedthat interest rates need to remain at a restrictive level for asustained period to ensure annual headline cpi inflation returns to the 1 to 3 percent target range
Committee noted that annual headline cpi inflation was expected to return to the target band in the december quarter of this year
Domestic inflation has fallen more slowly than expected and headline consumers price index (cpi) inflation remains above the committee’s target band
Committee alsoagreed that interest rates may have to remain at a restrictive levelfor longer than anticipated in the february monetary policy statement to ensure the inflation target is met
The committee discussed the possibility of increasing the ocr at this meeting

Reuters Tankan report for May: Manufacturing sentiment 9, unchanged from April

The monthly Reuters Tankan survey, a guide to the Bank of Japan’s quarterly tankan survey:

May manufacturers sentiment +9, unchanged from April
May non-manufacturers sentiment +26 vs +25 in April
August manufacturers index seen at +11, non-manufacturers at +23

Japan April Exports +8.3% y/y (expected +11.1%) Imports +8.3% (expected +9.0%)

Trade data for April 2024 from Japan, both exports and imports up 8.3% y/y
Adjusted trade balance is -560.8bn yen

Exports to:

China +9.6% y/y
US +8.8% y/y
EU -2% y/y

Japan March Machinery Orders +2.9% m/m (expected -2.1%)

For the January to March quarter orders +4.4% q/q

April to June projected to be at -1.6% y/y

Cryptocurrency News

White House and SEC Chair condemns crypto bill that seeks to dodge the regulator’s oversight

SEC Chair Gary Gensler says FIT21 bill poses a perpetual threat to investor protection.
FIT21 bill would bring most crypto assets under the purview of the CFTC as opposed to the SEC.
White House opposes FIT21 but doesn’t threaten veto as the US House of Representatives is scheduled to vote on the bill on Wednesday.

US Securities & Exchange Commission (SEC) Chair Gary Gensler expressed concerns about the potential impact of the FIT21 bill on investor protection in a statement on Wednesday. Meanwhile, the White House has opposed FIT21 but isn’t threatening to veto it as the House of Representatives will vote on the bill on Wednesday.

Gensler blasts FIT21 bill

SEC Chair Gary Gensler said on Wednesday that the Financial Innovation and Technology for the 21st Century Act (FIT21) poses a perpetual threat to investor protection. His main arguments center on the long-standing investment laws that have guided the American securities market for 90 years and the impact that the bill’s passage would have on the crypto industry’s jurisdiction.

“The Financial Innovation and Technology for the 21st Century Act (‘FIT 21’) would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk,” said Gensler in a statement.

The FIT21 bill aims to bring most crypto assets under the purview of the Commodity Futures Trading Commission (CFTC) rather than the SEC.Many crypto community members have voiced support for the bill, considering the SEC’s recent crackdown on several crypto projects.

“The bill allows issuers of crypto investment contracts to self-certify that their products are a ‘decentralized’ system,” Gensler said, “and then be deemed a special class of ‘digital commodities’ and thus not subject to SEC oversight”..

FIT21, originally introduced by the House Financial Services and the House Agriculture committees, was created to provide regulatory frameworks to guide the crypto industry.The bill is scheduled to be voted on in the House of Representatives on Wednesday.

Shiba Inu whales accumulate SHIB, 25% upswing likely

Shiba Inu price has breached a two-month consolidation, indicating its readiness to move.
Investors can expect SHIB to rally 25% and tag the $0.0000315 resistance level.
Invalidation of the bullish thesis will occur on the daily candlestick close below the $0.0000210 support level.

Shiba Inu (SHIB) price continues its struggle above a key hurdle.This development comes as SHIB, an ERC-20 meme coin, reacts to the Ethereum spot ETF approval news. The uptrend is likely to pick up as the ETF approval deadline nears. Investors looking to accumulate SHIB have a good opportunity to do so before the meme coin shoots up.

Shiba Inu price poised to move higher

Since setting up a local top at $0.0000457 on March 5, the Shiba Inu price has produced lower lows and lower highs. Going forward, investors can expect SHIB to form a base above $0.0000253 and kickstart a 25% recovery rally to the $0.0000315 resistance level. In a highly bullish scenario, investors can expect the dog-based meme coin to retest $0.0000355, the midpoint of the $0.0000253 to $0.0000457 range.

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Round up of today’s market news

ByBilals Tech

North American News