Twelve Charts This Week - 6/7/2024
Twelve Charts This Week - 6/7/2024
1
Several recent corporate and economic reports suggest that investors should be more cautious in the weeks ahead. First, as noted in last week’s TCTW, there were disappointing results from Salesforce. A few days later, Dell’s earnings also came short of expectations. On Monday, the manufacturing PMI for May was still below 50, which usually means that manufacturing is not growing. Elsewhere, the number of job openings is continuing to decline. In response to these and other factors, the Atlanta Fed has reduced its GDP growth forecast for the current quarter from 4% to 2.6%. There are in addition ECONOMIC SURPRISE INDICES from Citigroup, Bloomberg and Goldman Sachs that all point to a slowdown (chart). So far, the market has ignored these signals because 1) it tends to ignore macro news that it does not like (see for example the delayed, then sudden, reaction to the onset of the pandemic), 2) it interprets all these new items as more evidence that the Fed will cut interest rates once or twice this year, and 3) the price of energy is falling and bringing down 10-year Treasury yields. (via @PeterBerezinBCA)
🚨 Stocks or ETFs impacted by this: Magnificent Seven; Other growth stocks; XLC, XLY, XLK, SPY, QQQ, TLT .
2
Speaking of energy, and oil in particular, OPEC+ extended its cuts into 2025. But the market was unimpressed, due to the amount of quota cheating that is taking place. The price of crude has fallen 14% in the past two months. This decline, if it sticks, should be helpful in continuing to fade inflation, and by extension in reducing the 10-year Treasury yield to 4% or lower. Jim Bianco shows the following CORRELATION BETWEEN THE PRICE OF CRUDE OIL AND THE 10-YEAR YIELD. Even if the Fed does not cut rates in September, the market is already reducing funding costs across the board. The 30-year mortgage rate dipped below 7% yesterday. (via @biancoresearch)
🚨 Stocks or ETFs impacted by this: All oil stocks, XLE, XOM, CVX, TLT.
