Thursday's Markets Update (March 28, 2024)

28 Mar 2024 by rate3

On Thursday, stocks barely budged at the close of Q1, with investors awaiting inflation data and Powell's comments. This caution persists despite a strong quarter for stocks, with the S&P up 10% (its best performance since 2019). Internationally, gold reached a new ATH on expectations of global rate cuts, oil rose due to geopolitical tensions, and the dollar index is up following hawkish comments from FOMC members. In the crypto market, BTC surpassed 70K and ETH reached 3.5K once again. Bitcoin Cash continued its surge, adding 7% and surpassing 575.

Details

The economy grew at a solid 3.4% annual rate in Q4 of 2023, slightly better than first thought. This was driven by stronger consumer spending on services and increased business investment in areas like technology and structures. Housing investment grew modestly, while government spending rose more than expected. Trade played a smaller role as both exports and imports grew slower than initial estimates. A bigger-than-expected reduction in business inventories also weighed slightly on the final growth figure. (BEA)
Jobless claims unexpectedly fell to 210K in late March, better than expected. This continues a trend of low claims, but a separate measure of ongoing unemployment ticked up slightly. The data suggests a tight labor market, potentially allowing the Fed to wait before cutting rates. (DOL)
Chicago PMI showed a deepening contraction in March (index 41.4). This is the 4th straight month of decline and the worst in 10 months. New orders and production fell, while employment surprisingly rose. Prices paid by businesses also dipped. (ISM) Also, the Kansas City Fed's manufacturing index plunged to -9 in March, indicating a steep decline in production. (KFed)
At the same time, consumer confidence (Michigan Consumer Sentiment Index) rose to a 29-month high of 79.4 in March after a revision. Both expectations and current conditions improved, while inflation expectations dipped slightly. (SCA)

Crypto

A new report by Statista predicts a surge in global cryptocurrency use. Here's a quick breakdown:
Russia: Projected to have the world's second-highest number of crypto users (38.5 million) by 2027, boasting the fastest growth rate (15% annually).
USA: Currently leads with 52.8 million users, expected to nearly double by 2027 (102.2 million).
Europe: Combined user base to reach 191.6 million by 2027 from 101.5 million in 2022 (14% annual growth).
Rest of the World: Expected to experience explosive growth, jumping from 291.7 million users in 2022 to 729.3 million by 2027 (20% annual growth).

World Markets

German retail sales dropped 2.7% YoY in February. This follows a record low in March 2023 and indicates continued weakness in the retail sector. (DES)Germany's unemployment rate stuck at a 15-month high of 5.9% in March. Disparities remain, with Bremen and Berlin worst hit, while Bayern and Baden-Württemberg fare best. (Stat)
South Africa's producer price inflation (PPI) dipped to 4.5% in February (below expectations), after a higher reading in January. The pace of price increases slowed down for various goods. Monthly inflation was also lower than forecast. (SA)
Brazil's unemployment edged up to 7.8% in early 2024, but remains low compared to levels (up to 15%) since 2015. The number of unemployed people increased, but wages also grew slightly. (IBGE)

Currencies

The dollar rose to near a six-week high around 104.4 after a Fed official hinted at delaying rate cuts. This comes as inflation data remains strong. Investors await the key PCE inflation report for clues. The dollar gained ground against most currencies but could weaken versus the yen if Japan intervenes to support it.

Commodities

Gold prices surged to a new ATH, on track for its biggest monthly gain (+8.5%) in over a year. This rally is fueled by hopes of Fed rate cuts despite stubborn inflation. Investors see gold as attractive due to lower yields and ongoing geopolitical tensions. The key inflation data on Friday will be closely watched for clues on the Fed's future moves.
Oil prices climbed above $82 per barrel for a third month in a row. This is despite a surprise inventory build and ongoing geopolitical tensions. The rise is fueled by expectations of OPEC+ maintaining production cuts at their upcoming meeting, along with higher refinery activity.

Comment: On falling PMI in major States.

In Kansas, the main manufacturing industries heavily impacting regional PMIs include transportation equipment manufacturing (35%), machinery manufacturing (25%), and food manufacturing (20%).

Corporations such as Spirit AeroSystems Holdings Inc., Textron Aviation, and Cargill are major players in transportation equipment manufacturing, machinery manufacturing, and food manufacturing respectively, significantly influencing regional PMIs.

In Chicago, the dominant manufacturing sectors influencing regional PMIs are machinery manufacturing (30%), fabricated metal product manufacturing (25%), and food manufacturing (20%).

Prominent corporations like Caterpillar Inc., John Deere & Company, and Archer-Daniels-Midland Company are key contributors to machinery manufacturing, fabricated metal product manufacturing, and food manufacturing respectively, impacting regional PMIs.

In Michigan, key manufacturing industries significantly affecting regional PMIs are transportation equipment manufacturing (40%), machinery manufacturing (25%), and fabricated metal product manufacturing (20%).

Companies like General Motors, Ford Motor Company, and Fiat Chrysler Automobiles are dominant players in transportation equipment manufacturing, significantly affecting regional PMIs.

So, falling regional PMIs indicate a rapidly worsening situation in key industries (transportation, food, machinery) all across the country. Fed must be worrying.