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For those of you who had been scratching your heads about how the markets could be so complacent, wonder no more. Turns out you were right: a rich, slightly bitter brew of fewer interest rate cuts possible, geopolitical concerns and signs of softening consumer spending have at last had a negative impact on markets today. Today’s sell-off was deep, but not hellacious: the Dow dropped -529 points, -1.35%, the Nasdaq -228 points, -1.40%, the S&P 500 -1.23% and the small-cap Russell 2000 -1.08%.
All told for the week so far, we’re down -2% or -3%, depending on the index. Just this morning in this column we were discussing this — or rather, the lack of a -2% correction, which might be seen as a re-firming of saner valuations considering these myriad issues in play here in the spring of 2024. After all, we’re still up across the board year-to-date — comfortably so, in the cases of the S&P and the Nasdaq. So while we’re newly alert to market conditions, we’re not exactly alarmed by them.
Why today? Let us count the ways: oil prices are at their highest levels in recent memory on increasing tensions in the Middle East (Israel and Iran, primarily) which may impact oil supply lines. Recent earnings reports from companies supplying consumer products — french-fry manufacturer Lamb Weston (LW - Free Report) being the latest, but also Ulta (ULTA - Free Report) , PVH (PVH - Free Report) and lululemon (LULU - Free Report) — have depicted a landscape where the consumer has begun to shy away from higher retail prices. This is good for bringing down inflation in the longer-term, but may rankle the economy near-term.
We also heard from a slew of Fed members today. While most kept to the script of keeping hope for three interest rates cuts alive for the current calendar year, there was one notable exception today: Minneapolis’ Neel Kashkari, who suggested the Fed may not cut rates at all this year. (He also stated the more likely scenario was to see two cuts in 2024.) The impact of this suggestion was swift: market participants didn’t like it, and booked profits all down the line today. All four major indices closed just near session lows.
Finally, let us not forget that March jobs numbers are out tomorrow morning. The U.S. Bureau of Labor Statistics (BLS) issues its monthly non-farm payroll report just about every first Friday in the new month. These figures have been surprisingly high over the past few months, even the past year: the trailing 12-month average job gains is currently 225K, which is likely more than 100K higher than needed to account for retiring Baby Boomers.
That said, high immigration levels have skewed these numbers to undetermined levels, though the positive part on this front has been higher productivity without paying higher wages. We’ll see what the numbers tell us tomorrow.
Image: Bigstock
Alerted - Not Alarmed - By Market Pullback
Thursday, April 4th, 2024
For those of you who had been scratching your heads about how the markets could be so complacent, wonder no more. Turns out you were right: a rich, slightly bitter brew of fewer interest rate cuts possible, geopolitical concerns and signs of softening consumer spending have at last had a negative impact on markets today. Today’s sell-off was deep, but not hellacious: the Dow dropped -529 points, -1.35%, the Nasdaq -228 points, -1.40%, the S&P 500 -1.23% and the small-cap Russell 2000 -1.08%.
All told for the week so far, we’re down -2% or -3%, depending on the index. Just this morning in this column we were discussing this — or rather, the lack of a -2% correction, which might be seen as a re-firming of saner valuations considering these myriad issues in play here in the spring of 2024. After all, we’re still up across the board year-to-date — comfortably so, in the cases of the S&P and the Nasdaq. So while we’re newly alert to market conditions, we’re not exactly alarmed by them.
Why today? Let us count the ways: oil prices are at their highest levels in recent memory on increasing tensions in the Middle East (Israel and Iran, primarily) which may impact oil supply lines. Recent earnings reports from companies supplying consumer products — french-fry manufacturer Lamb Weston (LW - Free Report) being the latest, but also Ulta (ULTA - Free Report) , PVH (PVH - Free Report) and lululemon (LULU - Free Report) — have depicted a landscape where the consumer has begun to shy away from higher retail prices. This is good for bringing down inflation in the longer-term, but may rankle the economy near-term.
We also heard from a slew of Fed members today. While most kept to the script of keeping hope for three interest rates cuts alive for the current calendar year, there was one notable exception today: Minneapolis’ Neel Kashkari, who suggested the Fed may not cut rates at all this year. (He also stated the more likely scenario was to see two cuts in 2024.) The impact of this suggestion was swift: market participants didn’t like it, and booked profits all down the line today. All four major indices closed just near session lows.
Finally, let us not forget that March jobs numbers are out tomorrow morning. The U.S. Bureau of Labor Statistics (BLS) issues its monthly non-farm payroll report just about every first Friday in the new month. These figures have been surprisingly high over the past few months, even the past year: the trailing 12-month average job gains is currently 225K, which is likely more than 100K higher than needed to account for retiring Baby Boomers.
That said, high immigration levels have skewed these numbers to undetermined levels, though the positive part on this front has been higher productivity without paying higher wages. We’ll see what the numbers tell us tomorrow.
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