- Moving the markets
In the financial markets, Thursday’s atmosphere was tense as stock futures took a nosedive in response to the latest economic data from the U.S. This data painted a picture of a slowing economy coupled with stubborn inflation. The trading day was characterized by significant selloffs, yet the major indexes managed to recover somewhat from the day’s lowest points.
The U.S. economy’s growth rate, as measured by the gross domestic product (GDP), was reported at a mere 1.6% for the first quarter, according to the Bureau of Economic Analysis. This figure, the lowest in two years, fell short of the 2.4% growth anticipated by economists.
The Personal Consumption Expenditures (PCE) prices, a key indicator of inflation, rose by 3.4% in the first quarter, following a 1.8% increase in the previous quarter. More strikingly, the core PCE price index—which excludes the volatile food and energy sectors—jumped to 3.7%, surpassing even the highest analyst estimates and the expected 3.4%.
These indicators have heightened concerns about ongoing inflation and cast doubt on the Federal Reserve’s ability to lower interest rates in the near future. Considering this, traders have tempered their expectations for a loosening of the Fed’s monetary policy, now predicting only one rate cut for the year.
The disappointing GDP data has added to the pressures facing a market already anxious about a downturn in technology sector earnings—a situation that some are interpreting as the onset of stagflation. Following a significant drop in Meta’s stock value, other major tech companies, collectively known as the MAG7, experienced a similar downturn but later managed to pare back some of their losses. The trajectory was echoed by the most heavily shorted stocks, with the tech sector closing slightly lower overall.
In the bond market, yields surged as inflation concerns became more pronounced, with the 2-year yield once again surpassing the 5% mark, though it failed to maintain that level at the close. Meanwhile, the U.S. dollar experienced a volatile session but ultimately ended slightly higher. Gold prices saw a rally, Bitcoin rebounded from its overnight slump with a 1.2% gain, and crude oil prices made a strong move towards the $84 mark.
Given the day’s volatility and the looming question of inflation, investors are now turning their gaze towards the upcoming earnings reports from tech giants like Google and Microsoft. With the market at a crossroads, one can’t help but wonder:
Will the earnings from these industry leaders steer the market towards recovery or further uncertainty?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
Surging inflation and disappointing GDP figures led to a significant downturn in the markets, with the Dow Jones Industrial Average plummeting by over 700 points at its lowest.
However, a gradual recovery helped mitigate some of the initial losses, though the trading session closed predominantly in the negative.
Our TTIs also experienced a decline, albeit to a lesser extent compared to the major market indexes.
However, our TTIs managed to defy the trend and eked out a small gain.
This is how we closed 4/25/2024:
Domestic TTI: +6.89% above its M/A (prior close +7.11%)—Buy signal effective 11/21/2023.
International TTI: +7.09% above its M/A (prior close +7.55%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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