SVET Markets Weekly Update (Feb 27 — March 3, 2023)

06 Mar 2023 by rate3

Week 9, which was characterized by neutral to, questionably, positive fundamentals, was not much different from the previous one for both stock and crypto traders on the volatility side. However, on Thursday, NASDAQ outperformed BTC as bulls attempted to squeeze shorts, while the major tech index faced strong resistance after touching the 200-day average from above.

Notable Macroeconomic Updates:

Durable Goods Orders (Jan): -4.5 percent (fact), -4 (consensus);
ISM Manufacturing PMI (Feb): 47.7 (fact), 48 (consensus);
ISM Non-Manufacturing PMI (Feb): 55.1 (fact), 54.5 (consensus);
Chicago PMI (Feb): 43.6 (fact), 45 (consensus);
Pending Home Sales (Jan): +8,1 percent (fact), +1.1 (consensus).
On Monday morning, the Census Bureau reported that durable goods orders, which are meant to last at least three years, sank 4.5 percent in January. This was almost in line with market forecasts of -4 and the most significant drop since April of 2020. Orders for non-defense aircraft and parts showed the biggest decline at -54.6 percent, which might be interpreted as a re-adjustment after the January surge in orders of 5.1 percent. Excluding transportation, durable goods orders were up 0.7 percent, which is comparable with the yearly average.

At the same time, pending home sales surged 8.1 percent in January, marking the biggest hike since June of 2020. This far exceeded the market forecasts of a 1 percent gain. Both of these leading indicators show the strength of the economy and do not reveal any new information for traders. As a result, the NASDAQ remained at about 15K during the day session (opening: 11517, closing: 11466), and BTC slid 1.6 percent (opening: 23704, closing: 23321). Looks like the fact that the Dallas Fed Manufacturing Index slipped to -13.5 in February (-2 was expected) did not impact the traders’ decisions.

On Tuesday, the stock market was uncertain, possibly due to lack of a novel information in the published macroeconomic data. NASDAQ hovered around 11.4K (open: 11451, close: 11455) and BTC remained stagnant at approximately 23.3K (open: 23403, close: 23272) during the day session. BTC saw an increase in after-hours trading.

The Census Bureau reported a decrease in wholesale inventories of 0.4% to USD 929.7 billion in January 2023, which was the first decline in inventories since July 2020. This was attributed to a drop in stocks for both durable (-0.1% compared to 0.6% in December) and non-durable goods (-0.8% same as December).

Additionally, Richmond Fed Manufacturing Shipments in the United States decreased to -15 points in February compared to -3 points in January 2023, which was worse than the expected value of -2. Furthermore, the S&P/Case-Shiller Home Price Index in the United States experienced a 0.9% month-over-month decline in December 2022, marking the sixth consecutive month of declining house prices based on non-seasonally adjusted data.

Wednesday session went without surprises underlined by a lazy ISM Manufacturing PMI update to 47.7 (47.4 — previous, 48 — prognosis). As reported by the Institute for Supply Management a noticeable decline was seen in production (47.3 vs 48) while employment fell (49.1 vs 50.6). Companies continue to insist that they will not substantially reduce head counts. At the same time, price pressures increased (51.3 vs 44.5). Accordingly, NASDAQ barely moved from 11447 on the opening to 11379 at the closure of the day session (-0.6 percent). BTC open and close prices was 23689 and 23421 respectfully (-1.1).

On Thursday and Friday daily trading sessions NASDAQ gained significantly over BTC by rising +1.7 (o:11271, c: 11462) and +1.4 percent (o:11524, c:11689) correspondingly. At the same time BTC were declining by -0.7 (o:23309, c:23467) and -0.4 (o:22402, c:22308).

On the macroeconomic side, the number of individuals filing for jobless benefits decreased by 2,000 on March 2nd to reach 190,000 for the week ending February 25th, which is below the market expectation of 195,000. This value is in close proximity to the nine-month low of 183,000 recorded at the end of January, indicating a tight labor market in the US, possibly due to reduced labor force participation. Consequently, it might add to inflationary pressures.

On March 3rd the ISM Services PMI remained stable at 55.1 in February, which is only slightly different from the January figure of 55.2 and above the expected value of 54.5. Notably, there were faster increases for new orders (62.6, which is the highest since November 2021 compared to 60.4 in January), new export orders (61.7 versus 59), and employment (54, the highest since December 2021 versus 50). Additionally, price pressures decreased (65.6 versus 67.8), and supplier deliveries fell (47.6, the fastest delivery performance since June 2009 compared to 50).

This week, traders’ attention is focused on Powell’s speeches on Tuesday and Wednesday, as well as Thursday’s Initial Jobless Claims and Friday’s Unemployment Rate reports. None of these are expected to bring any surprises. Consequently, it is likely that the game plan for most market participants will be based on technical indicators rather than fundamental ones.