Market Trader Report | Apr 14, 2024
Market Trader Report | Apr 14, 2024
What is included in this week's edition?
WEEKLY REVIEW: An overview of current market standing, fundamental matters with implications upon the market, and general sentiment regarding the major US indices.
LOOKING AHEAD: Key takeaways to consider as we look forward to the upcoming trading week.
MARKETS: A technical review of the major indices and commodities that represent the overall health of the market.
Market Trader by MyntBit
Issue# 15
This week saw a mixed performance in stocks, driven by conflicting economic indicators. The Consumer Price Index (CPI) inflation exceeded expectations, posing a challenge to achieving sustainable progress towards the 2% inflation target and dampening hopes for a June rate cut. On Thursday, the Producer Price Index (PPI) inflation was lower than anticipated, which momentarily lifted equities despite the continued uncertainty regarding a potential rate cut in June. Additionally, attention was drawn to the National Federation of Independent Business (NFIB) Small Business Optimism Index, which reached an 11-year low, alongside lower-than-expected consumer sentiment and a perceived hawkish tone in Fedspeak. Looking ahead, the market focus will shift to retail sales, housing market updates, and industrial production data. Furthermore, investors will closely monitor the first-quarter earnings season, which commenced with banking sector reports today.
Weekly Market Review
The latest Consumer Price Index (CPI) inflation release added to the evidence of a resilient economy, reducing the likelihood of rate cuts, although Producer Price Index (PPI) inflation provided some offsetting influence. In March, core CPI rose by 3.8% year-over-year (YOY) and 0.4% month-over-month (MOM), while headline CPI increased by 3.5% YOY and 0.4% MOM, all-surpassing consensus forecasts and remaining steady compared to the previous month except for the YOY headline figure. Service sector inflation remained stubborn, with the core services index up by 0.5%. This led to decreased market expectations of a rate cut in June, prompting a notable decline in equities. However, Thursday's PPI figures, although lower than expected (excluding the YOY core print), momentarily reversed the equity decline. Despite falling short of consensus, PPI saw its highest YOY increase since April 2023. Core PPI registered a 2.4% YOY and 0.2% MOM increase, while headline PPI stood at 2.1% YOY and 0.2% MOM. The market consensus now leans towards a rate cut in the latter half of the year, with the probability of a June cut estimated at around 20% according to the CME FedWatch Tool. Attention was also on Fedspeak and the February Federal Open Market Committee (FOMC) meeting minutes, particularly regarding their stance on inflation. The minutes echoed post-meeting sentiments, suggesting that the policy rate may have peaked and that a less restrictive stance could be appropriate later this year if economic conditions remain as anticipated. Fedspeak during the week leaned more hawkish, with statements from Federal Reserve Bank of New York President John Williams indicating no immediate need for cuts and stressing that inflation is still below target. Similarly, Federal Reserve Bank of Boston President Susan Collins suggested a longer timeline for policy easing than previously thought. Other significant updates included declines in small business optimism and consumer sentiment. The NFIB Small Business Optimism Index dropped to 88.5 in March, the lowest since December 2012, primarily due to reduced sales expectations and concerns about inflation. Small businesses also faced challenges in hiring. Meanwhile, the University of Michigan Consumer Sentiment Index slipped slightly to 77.9 in April, surprising analysts amidst heightened inflation expectations. By Friday noon, major indices showed a mixed performance for the week, with the S&P 500 Index and Dow on track for declines of 1.0% and 1.9% respectively, while the Nasdaq Composite remained relatively flat, up by 0.1%.
Weekly Performance Heatmap
Overall Stock Market Heatmap & Sector Performance
Looking Ahead to the Upcoming Week
The upcoming week will provide significant updates across various economic fronts, with a particular focus on retail sales, industrial production, and the Federal Reserve's Beige Book survey, offering insights into regional economic conditions. Also drawing attention are reports such as the Index of Leading Economic Indicators and regional business surveys from the New York and Philadelphia Fed districts. The housing market will be under scrutiny, with data releases covering existing home sales, housing starts, and homebuilder sentiment.
In the Bond auction space, the U.S. Treasury Department will issue $36 billion in 5-year Treasury Inflation Protected Securities (TIPS) and 20-year bonds. Meanwhile, in China, a busy calendar includes updates on the gross domestic product (GDP), industrial production, retail sales, and fixed-asset investment, along with announcements regarding the one-year medium-term lending facility rate and volume from the People’s Bank of China.
From Japan, attention will be on updates regarding the national Consumer Price Index (CPI), Tertiary Industry Index, core machine orders, and the trade balance. In Australia, key releases include labor market data, business confidence, and the leading index.
In Europe, the focus will center on the eurozone's finalized March CPI figures, April's ZEW expectations for economic growth, and February's industrial production and trade balance. Specifically from Germany, updates on the Producer Price Index (PPI) and the ZEW Index of Current Conditions will be monitored closely.
Finally, releases from the U.K. will encompass labor market data, CPI, the companion Retail Price Index, retail sales figures, and house prices.
Notable Earnings
Important Economical Events
Markets
Below are the levels for the upcoming week - updates will be provided on X (previously Twitter) throughout the week.
SPY - SPDR S&P 500 ETF Trust
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Support: $500 | Resistance: $525
Over the past two weeks, SPY has displayed some weakness, encountering resistance at our initial target of 520. Recently, it bounced on the 50-day moving average (MA) of around $509 after breaking below our support level of $510. The next significant level to watch for is the critical mark of $500.
QQQ - Invesco QQQ Trust Series 1
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Support: $420 | Resistance: $450
While tech stocks and the QQQ (Invesco QQQ Trust) have experienced a decline, it hasn't been as severe as the broader market represented by SPY. Currently, the QQQ is finding support around the 20-day moving average (MA), though it has fallen below our support level at $440. The next level to watch closely is $420 if this weakness persists.
IWM - iShares Russell 2000 ETF
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Support: $200 | Resistance: $210, $215
Following the release of the robust CPI data, small caps and the IWM (iShares Russell 2000 ETF) experienced notable downward pressure. This reaction stemmed from the possibility of delayed rate cuts, leading to a break of our critical level at $200. Currently, IWM is finding support around the 100-day moving average (MA), potentially returning to the multi-year range once more.
DIA - SPDR Dow Jones Industrial Average ETF Trust
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Support: $380 | Resistance: $400
In parallel with small caps, the DIA also faced significant weakness after the CPI data release and the earnings reports from banks. This paints a picture of a challenging week with a worrisome outlook. Presently, the DIA is positioned at our support level and the 100-day moving average (MA) at $380.
VIX - Volatility S&P 500 Index
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Support: $16 | Resistance: $20
The volatility witnessed a notable increase this week, triggered by the release of economic data and geopolitical concerns, causing it to surpass the $18 threshold for the first time since October 23. This uptick in volatility signals a market environment characterized by caution and uncertainty.
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