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| | | Good morning, | The markets endured another turbulent week, with major indices posting significant losses. The Russell 2000 fell 2.8%, the S&P 500 declined 3.1%, and the Nasdaq Composite registered a staggering 5.5% loss. Interestingly, the price-weighted Dow Jones Industrial Average settled unchanged for the week. | This marks the sixth consecutive week of losses for the S&P 500 and the Nasdaq Composite. The ongoing weakness in mega-cap stocks and semiconductor shares, which have been leading the market higher this year, had a disproportionate impact on index performance. The Vanguard Mega Cap Growth ETF (MGK) dropped 5.8%, while the PHLX Semiconductor Index (SOX) plunged 9.2%. | Have a great week! | Irving Wilkinson, Editor | AlphaBetaStock.com | Table of Contents | | LAST WEEK’S MARKET OVERVIEW |
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| | Rate Watch | Investors are recalibrating their expectations regarding the future path of interest rates. After initially anticipating six to seven rate cuts throughout the year, those hopes have gradually diminished to a mere trickle. In fact, there is even discussion surrounding the risk of further tightening measures. | | As is often the case, the pendulum swings between traders’ hopes and fears, struggling to maintain a balanced perspective. Excessive pessimism should coincide with a market low. I’ll be keeping a close watch on U.S. government bond yields, particularly the 2-year and 10-year maturities, to detect any downward turn. Such a development should logically fuel a decline in the U.S. dollar and a recovery in the stock markets. | Indeed, amid an election year, with the specter of President Donald Trump’s potential return to power, it’s a safe bet that the Federal Reserve won’t allow conditions to deteriorate too far, risking undermining economic growth and eroding American households’ confidence in the establishment. | US Market Highlights | ASML (ASML) and TSMC (TSM) were standout losers in the semiconductor space, declining 10.6% and 10.4% respectively. ASML reported weaker-than-expected Q1 bookings, while TSMC, despite posting better-than-expected earnings, warned that the chip industry is enduring a more gradual recovery than anticipated. NVIDIA (NVDA), another semiconductor giant, dropped a staggering 13.6% on no specific news, although its shares are still up an impressive 53.9% since the start of 2024. The downside bias in stocks was also fueled by rising interest rates, as Fed officials suggested they are in no hurry to cut rates. Recent inflation reports have not given them enough confidence that inflation is on a sustainable path to the 2% target. The 2-yr note yield settled nine basis points higher at 4.97%, while the 10-yr note yield settled 12 basis points higher at 4.62%. Geopolitical uncertainty related to events in the Middle East also contributed to the negative sentiment, as Israel attacked Iranian territory in retaliation for Iran’s recent drone and missile offensive.
| Global Highlights | The IMF upgraded its global growth forecast to 3.2% for 2024, citing the global economy’s “surprising resilience” despite inflationary pressures and monetary policy shifts. China’s economy grew 5.3% in the first quarter, beating expectations by a wide margin, as export volume grew 14%. However, industrial output growth of 4.5% and an increase in retail sales of 3.1% both missed estimates. ECB President Lagarde signaled that the ECB will cut interest rates soon, barring any major surprises, but noted they will monitor oil prices closely amid fears of escalating conflict in the Middle East. UK inflation cooled to a two-and-a-half-year low last month, coming in at 3.2% higher than the same month a year earlier, slightly above forecasts of 3.1%. Canada raised its capital gains tax as it aims to finance new housing and rein in deficits amid ballooning federal spending levels. The inclusion rate for capital gains over C$250,000 rises from 50% to 66%.
| Investor Takeaways | As an investor, it’s crucial to maintain a long-term perspective during periods of market volatility. While short-term fluctuations can be unsettling, they also present opportunities for those with patience and discipline. | Here’s a financial fact for you: Over the past 20 years, the S&P 500 has experienced an average intra-year decline of 14.3%, yet it has still managed to deliver positive returns in 16 of those 20 years. | Diversification remains key, as different sectors and asset classes often move in opposite directions. This week, we saw the consumer staples (+1.4%), utilities (+1.9%), and financial (+0.8%) sectors log gains, while technology, consumer discretionary, and communication services sectors experienced significant declines. | It’s also important to stay informed about geopolitical events and their potential impact on markets. The escalating tensions in the Middle East are a prime example of how such events can influence investor sentiment and drive market movements. | | | MaxAI.me - Boost Your Productivity with 1-Click A | Discover the power of AI at your fingertips. MaxAI.me offers instant summaries, fast email composition, and AI-driven web searches on your browser, all with a single click. Join over 1 million users who are already mastering fast email composition and crafting engaging social media posts in seconds with MaxAI.me, and see why we're ProductHunt's #1 of the day and week. Make tedious tasks a thing of the past. Embrace smart, efficient browsing with MaxAI.me today! | Install for free | | Energy | | Heightened tension following explosions in Iran has investors increasingly concerned about the risk of escalating conflict in the Middle East. North Sea Brent crude for June delivery reached $87 a barrel, while West Texas Intermediate (WTI) for May delivery traded at $82.6 a barrel on the Nymex. | Metals | | Gold is still trading close to its all-time highs, slightly below $2,400 an ounce, benefiting from a solid outlook for Chinese demand and macroeconomic uncertainties. Silver is trading at $28.5 an ounce, copper at $9615 a tonne, palladium at around $1,022, and platinum at $936. | Crypto | | As Bitcoin’s Halving Day, which halves the BTC reward to miners for each block validated, took place overnight, the price of the digital currency lost 1.70% since Monday, trading around $65,800. Historically, Halving has had a significant positive impact on bitcoin’s price performance in the months following the event. Other crypto-assets like ether (ETH), SOL (Solana), and BNB (Binance Coin) also experienced declines this week. | | Next week, investors will closely monitor the latest U.S. personal income and outlays report scheduled for release on Friday. This data set will include readings on the Federal Reserve’s preferred inflation gauge – the personal consumption expenditures (PCE) price index. Market participants eagerly await insights into consumer spending patterns and inflationary pressures. | Additionally, the first estimate of U.S. GDP growth for Q1 2024 will be published on Thursday. This preliminary reading will provide an early glimpse into the economy’s performance during the first three months of the year. | Looking ahead, next week’s economic calendar includes: | Monday: Chicago Fed National Activity Index, Existing Home Sales Tuesday: New Home Sales, Richmond Fed Manufacturing Index Wednesday: Durable Goods Orders, FOMC Meeting Minutes Thursday: GDP, Jobless Claims, Pending Home Sales Friday: Personal Income and Outlays, Consumer Sentiment
| Geopolitical Tensions | Following this week’s escalating tensions between Israel and Iran, market participants are likely to remain on edge as they keep a watchful eye on the evolving situation in the Middle East. Treasury yields and oil prices will be closely monitored for any potential impacts from the regional conflict. | Earnings Season Heats Up | A significant portion of next week’s spotlight will be dominated by the first-quarter earnings season, which is set to intensify. Hundreds of companies are scheduled to announce their financial results, with several high-profile names taking center stage. | The “Magnificent 7” club members, including Microsoft (MSFT), Alphabet (GOOG) (GOOGL), Meta Platforms (META), and Tesla (TSLA), are among the most anticipated earnings releases. Investors will scrutinize these tech giants’ performances for insights into the broader industry and economic trends. | | |
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