Brace Yourself: Inflation and Fed Showdown Ahead!

Good morning,

Whew, what a week it’s been in the stock market! First, let’s discuss the big players: the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite. Imagine them as the popular kids in stock market school.

Recently, they’ve been a bit moody. The Dow played it cool, staying unchanged, while the S&P 500 had a minor hiccup, dropping just 0.1%. On the other hand, the Nasdaq was feeling a bit under the weather, logging a 0.7% loss. And let’s not forget about the Russell 2000, the underdog, which took a 2.1% dive.

Have a great week!

Irving Wilkinson, Editor

AlphaBetaStock.com

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The S&P 500 sectors have been like a mixed bag of jelly beans, each with its own flavor. The real estate sector took a -2.67% tumble, probably tripping over a ‘For Sale’ sign, while the consumer discretionary sector wasn’t far behind, dropping -1.73%.

On the flip side, the energy sector was the life of the party, jumping 4.32%, and the materials sector also had a good time, with a 0.69% gain.

Bond Market: The Interest Rate Tango

Now, let’s waltz over to the bond market, where the Treasury notes have been doing a tango with interest rates. The 10-year note yield leaped to 4.30%, and the 2-year note yield wasn’t shy either, rising to 4.72%.

For those scratching their heads, higher yields mean investors are demanding more for their money, signaling expectations of higher interest rates or inflation. It’s like paying extra for a front-row seat at a concert.

Economic Data: Reading The Tea Leaves

Economic reports are like the fortune cookies of the financial world, offering glimpses into the future. The recent Consumer Price Index (CPI) and Producer Price Index (PPI) readings were hotter than a summer barbecue, suggesting that inflation is sticking around like that one guest who won’t leave the party.

On the other hand, retail sales showed consumers are still opening their wallets, albeit hesitantly, like someone deciding whether to order dessert.

Market Movers And Shakers

In the world of stocks, there’s always drama. Boeing experienced some turbulence due to a Justice Department probe. Meanwhile, Apple settled a class-action lawsuit for a cool $490 million, probably just a drop in its massive bucket.

And let’s not forget Dollar Tree, which decided to close nearly 1,000 stores, perhaps realizing that not everything can be sold for a dollar in today’s economy.

Global Glimpses

Globally, the plot thickens. Nio is launching a low-cost EV brand, aiming to electrify the masses. The UK economy decided to shake off its blues and shows some growth. And the EU is giving Alibaba a hard look, proving that even online marketplaces can’t escape the regulatory spotlight.

Tech Titans And Innovations

In tech town, Stripe crossed the $1T payment volume mark, proving that digital payments are hotter than ever. SpaceX launched its Starship, not to be outdone by anyone on Earth. Apple is acquiring DarwinAI, so why not add artificial intelligence to their tech empire?

Wrapping Up: What Does It All Mean?

So, what’s the takeaway from this whirlwind tour of the stock market and economic landscape? The market is as unpredictable as ever, with sectors and stocks moving in different directions. Interest rates and inflation are key players, influencing everything from bond yields to consumer spending. And technological innovations and global developments keep adding twists to the tale.

For investors, it’s crucial to stay agile, like a surfer ready to ride the next wave, no matter where it comes from. Monitor economic indicators, sector performances, and global events.

And remember, in the stock market ocean, it’s not about avoiding the waves but learning how to surf them. Happy investing, and may your portfolio ride the biggest and best waves to financial success!

Oil & Energy

Buckle up, folks, because the energy markets are in for a wild ride! This week, traders realized the oil supply isn’t as abundant as they thought. The International Energy Agency dropped a bombshell, announcing in its latest report that the market could face a deficit this year. Talk about a plot twist!

Here’s the scoop: the Agency revised its demand growth forecasts upwards while adjusting the dynamics of global supply downwards due to the OPEC+ policy. It’s like a game of tug-of-war, with supply and demand pulling in opposite directions.

But wait, there’s more! Geopolitical tensions remain high in Ukraine, where oil installations in Russia have been struck. And let’s not forget the Middle East, particularly the Red Sea region, where tensions are simmering like a pot of hot oil

.As if that wasn’t enough drama, weekly U.S. inventories posted a surprise decline this week – the first since the end of January. It’s like the universe is conspiring to keep us on our toes!

So, what does this mean for prices? Brent crude trades higher at around $85, while WTI is hovering around $80.80.

Gold & Precious Metals

Speaking of thrilling rides, let’s talk about copper! This industrial metal performs like a champ in London, inching closer to the $9,000 per metric ton mark. As they say, when copper shines, the world takes notice!

The reason behind this upturn? It’s all about supply, baby! China, the world’s largest smelter, has agreed to reduce its copper output. They’re playing hard to get, and the market is eating it up!

But that’s not all! Aluminum has stabilized at $2,200, while zinc has advanced to $2,520. These industrial metals flex their muscles, and we’re here for it!

Now, let’s shift gears to the precious metals and cryptocurrency realms. After two strong weeks, gold took a well-deserved breather, trading at $2,160. It’s like the golden child decided to take a nap while bond yields rose, overshadowing its shine.

Cryptocurrencies

But fear not, crypto enthusiasts! Bitcoin (BTC) is still ruling the roost, even though it’s down 1.40% this week, around $68,000. On Thursday, it hit a new all-time high of $73,830, proving that it’s still the king of the crypto jungle!

What is the secret sauce behind Bitcoin’s rise? Bitcoin Spot ETFs! These exchange products fuel the fire, with a record day of net inflows on Wednesday. A whopping $1.05 billion flowed into ETFs in a single day—more money than most of us will see in a lifetime!

The ten Bitcoin Spot ETFs have a staggering $57.86 billion in assets under management, representing a jaw-dropping 4.16% of all bitcoins in circulation. Talk about a crypto revolution!

Meanwhile, Ether (ETH) is down 4% this week, but don’t count it out just yet. Unlike Bitcoin, ether has yet to regain its all-time high of $4,800 in November 2021. But many are eagerly awaiting an Ethereum Spot ETF, hoping it too can benefit from Wall Street’s fresh money. Only time will tell if this crypto darling can catch up to its big brother, Bitcoin.

Economic Reports

All right, folks, brace yourselves because this week is shaping up to be an absolute doozy in the world of finance. The main event? The highly anticipated Federal Reserve meeting is undoubtedly going to steal the spotlight.

Now, let’s be real here – most traders are already convinced that the Fed will keep interest rates on hold. I mean, come on, the futures market is pricing in a whopping 99% chance of that happening. But hey, that doesn’t mean we can’t have a little fun speculating, right?

Inflation Data Turns Up The Heat

Speaking of speculation, last week’s scorching inflation data has really thrown a wrench into the mix. It’s like the Fed has been handed a piping hot potato, and they’ve gotta figure out how to handle it without getting burned.

According to James A. Kostohryz, the big kahuna over at Investing Group, the Fed needs to seriously crank up the hawkish rhetoric to “dampen expectations regarding the timing and extent of Fed rate cuts in 2024.” Yikes, that doesn’t sound like a walk in the park, does it?

But wait, there’s more! The real showstopper this week is the Summary of Economic Projections, also known as the dot plot. This bad boy is essentially a crystal ball that gives us a glimpse into the Fed’s future rate hike plans. And let me tell you, if those FOMC members start pushing out their forecasts, the “higher-for-longer” narrative is going to gain some serious traction again.

Housing Market Takes Center Stage

Alright, enough about the Fed for a minute. Let’s talk about something a little closer to home – literally. This week, we’ve got a slew of housing market data coming our way, and it’s sure to keep us on our toes.

Earnings Extravaganza

But wait, there’s more! This week is also shaping up to be an earnings extravaganza, with a whole host of big-name companies reporting their quarterly results. Here are a few highlights:

Volatility Watch

Now, let’s talk about something a little more exciting – volatility! Options trading volume is through the roof for Chewy (CHWY), so keep an eye on that one.

And for all you short-sellers out there, the list of highly-shorted stocks includes:

On the flip side, if you’re looking for some potential winners, the most overbought stocks according to their 14-day Relative Strength Index include:

And if you’re feeling a little daring, the most oversold stocks according to their 14-day Relative Strength Index are: