Tuesday's Markets Update (May 9, 2023)

09 May 2023 by rate3

On Tuesday, the Small Business Optimism Index for April decreased further, but traders, who were waiting for Wednesday's inflation data release, remained apathetic and NASDAQ (c:12195, o:12179) as well as BTC (o:27758, c:27716) were almost unmoved.

NFIB's Small Business April's Optimism Index decreased by 1.1 points to 89.0 marking the 16th consecutive month below the 49-year history of 98. Labor quality and inflation on the top of small businesses' concerns.

Overall, small businesses are facing significant challenges related to labor quality, inflation, inventory management, and supply chain disruptions. The decrease in reports of positive profit trends and a decrease in the net percent of owners raising average selling prices suggest a slowdown in business growth. Shortages in key industries such as manufacturing, agriculture, retail, and wholesale are further exacerbating the challenges faced by small businesses.

However, the fact that a net 17% of owners are planning to create new jobs in the next three months and a net 21% plan to raise compensation suggests that some small businesses are still optimistic about their prospects. The high percentage of owners reporting capital outlays in the last six months also precludes that some businesses are investing in their growth despite the challenging environment.

Also, John Williams, CEO of NY Fed, made a speech at the Economic Club of New York, where he said that he's seeing signs of improvement in the US economy, with supply chain pressures easing and rent inflation moderating. He expects inflation to decline to around 3 1/4 percent this year before returning to the longer-run goal of 2 percent over the next two years, with unemployment gradually rising to about 4 to 4 1/2 percent over the next year.

World's Notable Macroeconomic Updates:

Brazil: Country's central bank kept Selic rate at 13.75% in May 2023, hinting at a possible halt on future hikes. Inflation decreased to 4.65% in March from 5.6% in Feb 2023, with expectations at 5.8% and 3.6% for 2023 and 2024. The board noted global activity and inflation's resilience, with tightening continuing in significant economies.

Mexico: Country's annual inflation fell to 6.25% in April 2023. Overall, the data suggests that inflation rate is showing signs of easing, but it remains above the Central Bank's 2.0%-4.0% target range. The decrease in prices for certain categories and the slight monthly decrease in consumer prices could indicate that inflationary pressures may continue to ease in the coming months. However, it remains to be seen if this trend will continue in the long term.

South Korea: The unemployment rate in the Country decreased to 2.6% in April 2023 from 2.7% in the previous month, while the economy added jobs for the 25th straight month. Despite higher borrowing costs and an economic slowdown, the number of people employed increased by 354K from a year ago. The Bank of Korea has been keeping borrowing costs at 3.5 percent flat since February to support employment as inflation has eased.