Analytics, 28 May 2023
Week 21 in Brief
How did the US market perform?
- On Friday, the stock market experienced a significant increase as traders expressed optimism about lawmakers reaching an agreement to raise the U.S. debt ceiling.
- The Dow Jones Industrial Average rose by 328.69 points, or 1%, settling at 33,093.34. The S&P 500 also saw a gain of 1.3%, closing at 4,205.45, while the Nasdaq Composite surged by 2.2% to reach 12,975.69.
- Leading the Dow higher were Intel and American Express, which saw increases of 5.8% and 4.1% respectively. Additionally, the tech and consumer discretionary sectors of the S&P 500 experienced growth of over 2% each.
- The Nasdaq achieved its fifth consecutive weekly gain, rising by 2.5%. Similarly, the S&P 500 recorded a one-week advance of 0.3%. However, the Dow poorly performed this week, experiencing a 1% decline.
- New data released on Friday morning revealed that inflation in April exceeded expectations. The personal consumption expenditures index, which is the Federal Reserve’s preferred indicator of price pressures, increased by 0.4% last month and rose by 4.7% compared to the previous year.
- Nvidia’s (NVDA) optimistic prediction regarding the high demand for AI-focused chipsets had a significant impact on the stock prices of companies involved in AI, such as Adobe (ADBE) and Advanced Micro Devices (AMD) which both saw weekly gains of by 11.89% and 20.04% respectively.
- Following a decline during premarket and after-hours trading due to a revenue miss, shares of Costco (COST) saw a slight recovery during early trading on Friday. This occurred within the context of an eventful earnings season, where various companies were releasing their financial reports. The stock closed ended up closing much higher by 4.26% on Friday at $507.26.
- Best Buy (BBY) achieved adjusted earnings of $1.15 per share, surpassing the estimated $1.10 per share forecasted by analysts. However, the company’s sales of $9.47 billion fell slightly short of the expected $9.52 billion. Nevertheless, the stock closed higher by 4.28% on Friday.
How did the European markets perform?
- European shares experienced a notable increase on Friday, driven by strong gains in the technology sector – with the FTSE 100 and Dax rising by 0.74% and 1.20% respectively.
- The pan-European STOXX 600 index closed 1.2% higher, marking its strongest one-day gain in almost two months. This recovery came after the index hit an eight-week low on Thursday.
- Although European stocks achieved multi-year highs earlier in the month, with the German DAX hitting a record high, concerns about slowing economic growth and persistent inflation remain. The European Central Bank is considering two more rate hikes, but discussions on future moves remain open due to the stubbornness of inflation.
- On a company level, Swedish gaming company Embracer saw a significant increase of 13.1%, leading the STOXX 600.
- French car parts maker Faurecia rose by 7.5% after receiving an upgrade to “buy” from Jefferies.
- Official data indicates that British consumers increased their spending last month, demonstrating a faster pace compared to previous months.
How did Asian markets perform?
- In Japan, the Nikkei 225 index rose by 0.31%, reaching 30,916 and surpassing the 31,000 mark earlier in the day.
- Japan recently finalized export control rules, set to take effect on July 23, further aligning with the United States in their efforts to limit China’s ability to produce advanced chips.
- Tokyo’s core-inflation, which excludes fresh food and fuel costs, saw a significant rise of 3.9%, the fastest pace since 1982.
- South Korea’s Kospi index rose by 0.16% and closed at 2,558.81, reversing losses from the previous day.
- Mainland Chinese markets showed gains across the board. The Shanghai Composite index ended a three-day losing streak and closed 0.35% higher at 3,212.5, while the Shenzhen Component index also halted an identical loss streak and finished 0.12% up at 10,909.65.
Bond Market
- On Friday, the 2-year Treasury yield rose as investors awaited economic data that could impact the Federal Reserve’s interest rate policy, while debt ceiling deal talks continued.
- The 2-year Treasury yield reached 4.568% after rising by 10 basis points. Conversely, the yield on the 10-year Treasury decreased by 1 basis point to 3.810%.
- Investors paid attention to the release of the personal consumption expenditures price index for April, which serves as the Federal Reserve’s preferred inflation gauge.
- In April, inflation rose by 0.4%, surpassing the 0.3% forecasted by economists polled by Dow Jones. On an annual basis, the index increased by 4.7% compared to the previous year, which also exceeded expectations.
Commodities Market
- Oil prices experienced a slight increase on Friday as U.S. officials appeared close to reaching a debt-ceiling deal. The market also assessed conflicting signals on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting.
- Nymex Crude Oil up 1.45% closing at USD 72.87.
- In terms of supply, the number of U.S. oil rigs fell by five to 570 this week, marking the largest monthly drop since June 2020, with a decline of 21 rigs in May, as reported by energy services firm Baker Hughes Co.
- Gold Futures inched up by 0.12% closing 1946.10, while Spot Gold against USD also gained 0.3%.
- Russia is leaning towards maintaining current oil production levels as Moscow is content with prices and output, according to sources.
Currencies
- Although the U.S. currency experienced minor losses on Friday, it is set to achieve a weekly gain for the third consecutive week, amounting to just under 1%.
- The Dollar Index, which measures the strength of the U.S. dollar against a basket of six other major currencies, declined by 0.02% to 104.23.
- EUR USD inched up 0.01%but fell by 0.79% for the week.
- USD JPY jumped 1.49% for the week while closing higher on Friday by 0.44%.
- GBP JPY gained 0.62% on Friday and closed higher for the week by 0.73%.
- The Turkish lira reached a new record low against the U.S. dollar, surpassing 20, ahead of the upcoming presidential election runoff – as Turkish assets have been facing significant pressure since the first round of the presidential election.
Next week
- The upcoming week will be shortened due to the Memorial Day holiday, resulting in U.S. markets being closed on Monday.
- On Tuesday, the latest updates on home prices will be released, including the Case-Shiller National Home Price Index and the FHFA House Price Index (HPI) for March.
- The labor market will be in focus, with the release of the Job Openings and Labor Turnover Survey (JOLTS) report for April, ADP’s National Employment Report tracking private sector payrolls, and the Labor Department’s nonfarm payrolls report for May.
- Updates on inflation and unemployment in the eurozone will also be provided.
- Several notable companies, including Salesforce, HP, Broadcom, Dollar General, Lululemon Athletica, Macy’s, and Dell Technologies, are scheduled to report their earnings during the week.