Softer Nowcast Data and Price Cuts
With quarterly corporate earnings reports for Q1 firmly in the rearview mirror, market have rotated to macro, specifically interest rates, being the key driver of daily undulations. Notable events for the week included Trump entering the record books for being the first President to wear the badge of being a convicted felon. Financial markets took the news in stride, with a fair amount uncertainty about what the conviction will mean for his election chances. Exit polls during primary season indicated that as many as 25% of Independents may be influenced negatively by the ruling. However, more recent polls, conducted in the two days after the court ruling, indicated that 35% of Republicans were more likely to vote for Trump after the conviction. More notable for the financial markets last week were streams of economic data that are beginning to paint a picture of deteriorating economic growth in the US, with only marginal signs that inflation is cooling, putting the Fed in a complicated position because they would like to get out in front of the slowdown in growth, but are being forced to sidelines because inflation remains uncomfortably high. Key data for the week included a softening of Q1 economic data, as the second estimate of Q1 GDP ticked lower to 1.3%, while Nowcast estimates the current quarter’s GDP estimates continue to erode. On an encouraging note, the monthly PCE data release showed that the recent resurgence inflation felt since the beginning of the year is subsiding, but the cooling trend didn’t have enough umph to convince anyone that inflation would be moving towards the Fed’s targeted range anytime soon. This leaves the markets in a trading range driven by rate cut expectations influenced by the daily whims of data releases and Fed press coverage. For the time being this includes the 10-year Treasury stuck in the danger zone between 440 and 450, with equity strength perking up as rates show signs of falling below 440 and weakness tied to anything that signals that rates may push above 450. For the Fed’s part, they continue to utilize a barbell rhetoric approach, splitting mouth pieces between doves and hawks, managing an optimistic message of rate cuts in 2024 from the doves, matched with a pragmatic view of vigilance from the hawks.
The Focus Point Leading Market Indicator continues in Neutral Conditions with help from loosening financial conditions
Magnificent 6 not expensive by post-pandemic standards
Retailers play to consumer strain with PR campaigns about price cuts
Nowcast GDP models for Q2 are diving
Focus Point Sector Rotation Update: Deterioration in breadth shines through in sector work