Thursday Macro & Markets Update – 04.04.24
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Thursday Macro & Markets Update – 04.04.24

Markets were little changed on Wednesday, with the three major benchmarks reversing their previous two-day losing streak, while the Dow Jones Industrial Average (DJIA) ended in the red for a third straight day. The S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) inched up for the day after Fed Chair Jerome Powell said he still expects interest rate cuts sometime this year.

Stocks slumped in the first two trading days of Q2, as economic data pointed at still-sticky inflation, dousing optimism for multiple rate cuts in 2024. Powell stuck to the mantra of data dependency in Wednesday’s speech, injecting some optimism, but not enough to reignite last week’s rally.  

Hanging on Powell’s Every Word

In a speech at Stanford University on Wednesday, the Federal Reserve’s Chairman said that “it is too soon to say whether the recent readings represent more than just a bump,” reiterating that policymakers need to achieve some level of certainty that inflation is on a sustained, downward path before lowering rates. However, he confirmed that barring any surprises, the central bank should start relaxing monetary policy sometime this year.

Prices, Jobs, and Gas Prices

February’s Core PCE data (the Fed’s preferred inflation gauge) cooled down from January’s spike, but the two-month price increase was the fastest in a year. At the same time, inflation-adjusted household spending surged on the back of stronger-than-expected wage growth, raising doubts for whether ther will be any relief from price-pressure easing in the near future. To add to the signs of the job market’s strength, private-sector payrolls grew more than expected, suggesting that there is no pressure whatsoever to lower interest rates.

Based on the latest data, markets are now increasingly pricing in a “no-landing” scenario, with a cyclical upturn looking more likely. On this background, while futures still price in a ~60% probability of the first rate cut coming in June, the overall 2024 cut outlook has come down to just 70 basis points, versus January’s expectations of a 170bps decrease and even lower than the 75bps envisioned in the latest Fed’s “Dot Plot.”

Complicating the inflation outlook, oil prices have been steadily climbing since the start of the year, a rise reflected in gasoline prices at the pump. While the Fed’s inflation measures strip out volatile food and energy prices, gas prices of over $3.5 a gallon feed into the consumer inflation expectations. If sustained, these rising expectations can strongly add to other economic indicators, which may prevent hoped-for rate cuts. 

Notable Stock News

¤ Intel (INTC) tumbled almost 9%, strongly weighing on DJIA, after revealing a $7 billion operating loss in its foundry business in 2023.   

¤ UnitedHealth (UNH), Humana (HUM), CVS Health (CVS), and Centene (CNC) also pressed down on the blue-chip index performance. The health insurers dropped after the Biden Administration refused to increase the Medicare Advantage rates from the initial proposal.  

¤ Ulta Beaty (ULTA) was the worst performer in the S&P 500 this week after the cosmetics retailer said it had seen a broad slowdown in sales in the first two months of its fiscal year. The company said that if the slowdown continues, current-quarter sales would be at the low end of its previous guidance.

¤ GE Aerospace (GE) surged on its first day of trading as a pure-play aerospace company, after it separated from GE Vernova (GEV), propping up the S&P 500’s performance.

¤ Ford (F) also helped the index rebound, surging after a report that showed sales increased 7% in the first quarter amid strong demand for hybrid vehicles.

¤ Tesla (TSLA) continued to weigh on the Nasdaq indexes, falling after it posted a first year-on-year sales decline since the start of the pandemic, with the demand hit by Chinese competition and flagging demand for EVs.     


Price Change
S&P 500
Dow Jones
Nasdaq 100

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