Is the economy starting to weaken?

Thoughts of the Day

Despite high interest rates, the US economy did not slow down but recent data shows cracks could be showing. The S&P Global US Composite PMI fell to 50.9, with manufacturing contracting slightly and services sector showing modest growth. Employment decreased for the first time since June 2020. Geopolitical concerns & the upcoming US Presidential elections may further challenge investment sentiment, potentially prompting policy responses if more cracks start to show.

This is an abridged version of our CIO’s daily writeup for the day, to view the full version, please login or subscribe to a membership plan.

Trading Tip

Daily trading tips are for members only, please subscribe to a membership plan to view.

Day Ahead

Earnings: AT&T (T), Boeing (BA), Meta Platforms (META), Antero Resources (AR), Ford Motor (F), Lam Research (LRCX)

Our Trading plan is only available for members, please subscribe to a membership plan to stay updated on Vee’s trades.

What Happened Yesterday

Market Movements as of New York Close 23 Apr 24

The US Treasury Yield curve steepened with the inversion falling to 0.32% as the US 2-year bond yield fell -0.04% to 4.93% while the 10-year yield edged -0.01% lower to 4.61%.

Australian Monthly CPI showed that prices rose +3.5% Year-on-Year (vs expected +3.4%),, up from +3.4% in Feb. On a quarterly basis, prices rose +1% Quarter-on-Quarter (vs +0.8% expected) in Q1’ 24, up from +0.6% in Q4’ 23. The AUDUSD rose +0.29% in immediate reaction from 0.6497 to 0.6517.

S&P Global reported weaker than expected Purchasing Managers Indices Data: Composite PMI (50.9 vs 52.1 prev), Manufacturing PMI (49.9 vs 52 exp and 51.9 prev), Services PMI (50.9 vs 52 exp and 51.7 prev). A reading below 50 shows contraction in the sector.

The US stock futures rose through the Asian and London trading session on Tuesday with the S&P 500 futures up +0.37% when the New York session began.

The US stock market opened higher from Monday. It then continued to trade higher through the New York session as risk sentiment remained on the high note. The S&P 500 finished +1.20% higher (high: +1.31%, low: +0.35%), the Dow Jones gained +0.69% (high: +0.84%, low: +0.15%) while the Nasdaq rose +1.51% (high: +1.76%, low: +0.39%).

Spotify (NYSE: SPOT, +11.41% during NY hours) beat earnings and revenue estimates after a year of cost cutting measures allowing it to rise +11.41% during the New York session. Earnings: 97 euro cents vs 65 euro cents expected, Revenue: 3.64 billion euros vs 3.61 billion euros expected. The company also expects net new Monthly Active Users of 16 million, for a total of 631 million monthly active users for the current quarter.

Tesla (NASDAQ: TSLA, +13.38% aftermarket) jumped in extended trading despite failing to meet expectations for both earnings and revenue as Elon Musk announced that production of new affordable EV models could begin sooner than expected (late this year or early 2025). Earnings: 45 cents vs 51 cents expected, Revenue: $21.30 billion vs $22.15 billion expected.

The crypto market traded relatively flat as the crypto market moved sideways.
This is a partial analysis of what happened yesterday, for a more detailed analysis, subscribe to a membership plan.

Headlines & Market Impact

Senate advances long-awaited aid for Israel, Ukraine, Taiwan, and TikTok bill

Notable Snippet: The Senate on Tuesday advanced a package to provide billions in aid to Israel, Ukraine and Taiwan, sending the legislation on a glide path to become law after a rocky six months of political battles.

In a final tally of 80-19, senators passed a crucial procedural vote with wide bipartisan support, signalling that the foreign aid package has the strength to pass a final vote.

If the Senate officially passes the legislation in the final vote, it would then go to President Joe Biden, who already said he would sign it into law after the House passed the package as four separate bills on Saturday.

The funding includes roughly $60 billion for Ukraine aid, $26 billion for Israel and $8 billion for Taiwan and Indo-Pacific security.

Spending-wise, the legislation is similar to the $95 billion foreign aid bill passed by the Senate in February, which has been effectively shelved in the House in the weeks since.

But this bill also contains several other foreign policy proposals, including a measure to force Chinese TikTok parent company ByteDance to sell the social media platform or else face a national ban of the app. The provision would give ByteDance nine months to sell, though Biden could extend that timeline to a year.

A source within the company said TikTok would pursue a “legal challenge” if the bill was signed into law, according to an internal memo obtained by NBC News.

We have further analysis of our headlines! Subscribe to a membership plan to view them.

Apple iPhone sales drop 19% in China as demand for Huawei smartphones soars, research says

Notable Snippet: Apple’s iPhone sales dropped sharply in China in the first quarter of this year as the company saw strong competition from domestic brand Huawei, according to a new report from market research firm Counterpoint Research.

Apple saw sales of its iPhones fall 19.1% in the first three months of the year, Counterpoint’s data showed, as Chinese telecommunications and consumer electronics giant Huawei saw a resurgence in its smartphone business.

The Shenzhen, China-based firm saw sales of its smartphones surge a whopping 69.7% in the first quarter, Counterpoint said.

This was due in no small part to the launch of Huawei’s Mate 60 smartphone, which comes with a high-end chip that supports next-generation 5G mobile connectivity.

Overall, smartphone sales in China grew 1.5% year on year in the first three months of the year, marking the second quarter of positive growth for the industry.

We have further analysis of our headlines! Subscribe to a membership plan to view them.

US business activity cools in April; inflation measures mixed

Notable Snippet: U.S. business activity cooled in April to a four-month low due to weaker demand, while rates of inflation eased slightly even as input prices rose sharply, suggesting some possible relief ahead as the Federal Reserve looks for signs that the economy is ebbing enough to bring inflation down further.

S&P Global said on Tuesday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March. A reading above 50 indicates expansion in the private sector.

The slowdown reflected weaker rates of growth in both the manufacturing and services sectors, with activity easing to three- and five-month lows, respectively. That in turn meant employment, which the Fed is watching closely for indications of a drop off, fell for the first time since June 2020, with the reduction focused on services.

The survey suggested that the economy lost momentum at the beginning of the second quarter compared to the January-March quarter. According to a Reuters survey of economists, GDP likely increased at a 2.4% annualised rate last quarter.

The S&P Global survey’s measure of new orders received by private businesses dropped to 48.4 from 51.7 in March, the first decline in six months, while its measure of prices paid for inputs declined to 56.5, off the six-month high of 58.7 reached in March but still a solid rate. The output prices gauge fell to 54.1, off the ten-month high of 56.4 recorded in March, but also still elevated.

Manufacturing entered contraction territory, with the survey’s flash manufacturing PMI slipping to 49.9 this month from 51.9 in March. New orders shrank slightly while growth in employment slowed, albeit modestly, and supply chains showed signs of spare capacity. The survey’s flash services sector PMI dipped to 50.9 in April from 51.7 in the prior month.

We have further analysis of our headlines! Subscribe to a membership plan to view them.



Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord