(CercleFinance.com) – The New York Stock Exchange ended sharply higher, with the main indices closing at their peak on Friday, despite a PCE index beyond expectations… but perhaps ‘less worse’ than what some feared .
It’s all a matter of psychology and the conclusion is that W>all Street has decided to ignore it and focus on the quarterly good numbers from Microsoft (+1.8%), SNAP (+23.4%) and Alphabet (+10%), which compensates for the disappointment of Meta on Wednesday and Intel on Thursday evening.
The Dow Jones gained 0.40%, the Nasdaq index gained 2.03% (or +4.4% weekly) and the S&P 500 gained 1.02% to end in contact with 5,100 ( i.e. +2.7% weekly).
Thus, the ‘S&P’ and the Nasdaq posted their best week of the year after completing the worst since October 2023 or January 2022 with -3% and -5.6% respectively.
Alphabet (+10%) was ahead of Nvidia which jumped +6.2% (last Friday, the stock collapsed -10%, pulverizing $200 billion in market capitalization).
Nvidia once again crossed the milestone of $2,000 billion in ‘capi’ (at $2,200 billion), closely followed by Alphabet ($2,030 billion).
Among the best performers of the day, we also found Micron and Applied Materials +3%, Amazon with +3.4%, Broadcom +3.8%, Datadog and KLA +5%
Intel, on the other hand, fell by -9.2%, disappointing forecasts for the first half of 2024), Dexcom by -9.9%.
On the rate side, T-Bonds which had just posted their worst levels of the year on Thursday evening – relaxed slightly with the publication of the ‘PCE’ inflation index (the gauge most watched by the FED) and which turns out to be disappointing.
The ‘PCE’ stood at +2.7% in March, compared to 2.5% in February, the underlying rate (excluding energy and food) however remaining at 2.8% from one month to the next.
American inflation is therefore a little higher than expected by economists.
The Commerce Department also indicates that American household spending increased by 0.8% in March compared to the previous month, while their income increased by 0.5%.
American consumer confidence deteriorated more sharply than initially estimated in April, to 77.2 in ‘definitive’, a level lower than the first estimate (77.9) and a clear decline compared to the level of 79.4 reached in March.
It is the component of households’ judgment of their current situation which has deteriorated most significantly, to 79 compared to 82.5 last month.
The expectations component fell to 76 this month after 77.4 in March.
The easing of T-Bonds is only ‘correlated’ with household confidence: we observe -4.3Pts on the US ’10-year’ towards 4.6630%, -0.5% only on the ‘2-year’ ‘ at 2.993%.
The estimated probability of a rate cut in June, which reached almost 64% a month ago according to the CME Group’s FedWatch tool, has returned to around 12% today.
In view of this barometer, expectations of a rate cut in September have fallen to 44%, almost equal to the scenario of a continuation of the ‘status quo’ (40%).
An absence of a rate cut is no longer the impossible scenario, while the consensus was still forecasting 6 to 7 rate cuts this year in 2024 (and a first easing in mid-March).
This is perhaps what is causing the Dollar to soar against the Yen which disintegrated by more than 1.75% this Friday to record a new 34-year low at 158.40 (i.e. more than 2.1% of weekly fallback).
This plunge in the Japanese currency should lead the BoJ to intervene because the fall of -12.5% since January 1 against the greenback is becoming very worrying and the volatility of the last 24 hours is frankly alarming.
With such a fragile Yen, the forecast of inflation at 2% in 2024 reiterated by the Bank of Japan seems untenable.
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