Stock indexes continue to trade in the fairly narrow range they've been stuck in for most of the year. In fact, the S&P 500 has been bouncing around the same 600-point range since last September. While stock indexes overall managed to power through the recent banking turmoil, uncertainty about the Federal Reserve's next moves and worries about possible recession this year are still keeping a lot of money on the sidelines, making it tough for bulls to really gain any significant ground.

As fresh economic data has rolled in this week, Wall Street's biggest concern seems to be shifting away from inflation and more toward a potential economic downturn that could result in a drawn out "earnings recession." Wall Street insiders currently expect an earnings decline of -6.6% for S&P 500 companies in Q1 2023 and a decline of around -4% in Q2.

Bears however believe those estimates are still too high, especially if the US does flip to recession. For what its worth, S&P 500 earnings decline an average of -16.4% in recessions going back to 1957. Only two of the last 10 recessions saw no decline - the 1973–1975 and 1980 recessions. Notably, both of those periods included climbing levels of inflation.

Q1 earnings season unofficially kicks off with big Wall Street bank results next Friday, including JPMorgan Chase, Citigroup, and Wells Fargo.

Today, investors are anxious to see private employment data from ADP, which could provide a preview of what to expect from the highly anticipated March Employment Report due this Friday. Insiders expect ADP to report a gain of +200,000 jobs, slightly less than the +240,000 gain anticipated for the official March jobs report.

The other highlight today is the ISM Services Index, a sector singled out repeatedly by the Fed as a driver of inflation. The ISM gauge for March is expected to show expansion for a third month in a row, though at a slightly slower pace than February. The Prices Paid component is seen falling only marginally from 65.6 to 65.2. For most of the past year, investors have treated "bad news" as "good news" when it came to economic data as disappointing results have mostly boosted expectations that the Fed would pause its tightening campaign.

Now, however, with recession worries on the rise, bad news might again just be treated as bad news and result in further stock market weakness.

One big question Wall Street is starting to more seriously debate - at what point does the Fed turn its efforts away from fighting inflation and instead start weighing the risks of higher interest rates on a faltering economy? Fed Funds Futures is now give less than 50% odds of a rate hike at t he next Fed meeting May 2-3. There is a lot of data still to come between now and then, including the March CPI report on 4/12 (next Wednesday), March Retail Sales on 4/14 (next Friday), Consumer Confidence on 4/25, and PCE Prices on 4/28.

Stanford’s 386-page Report on the State of Artifical Intelligence: Until 2014, most significant machine learning models were released by academia. Since then, industry has taken over. In 2022, there were 32 significant industry-produced machine learning models compared to just three produced by academia. Building state-of-the-art AI systems increasingly requires large amounts of data, compute, and money, resources that industry actors inherently possess in greater amounts compared to nonprofits and academia. According to the AIAAIC database, which tracks incidents related to the ethical misuse of AI, the number of AI incidents and controversies has increased 26 times since 2012. Some notable incidents in 2022 included a deepfake video of Ukrainian President Volodymyr Zelenskyy surrendering and U.S. prisons using call-monitoring technology on their inmates. This growth is evidence of both greater use of AI technologies and awareness of misuse possibilities. AI models, however, are starting to rapidly accelerate scientific progress and in 2022 were used to aid hydrogen fusion, improve the efficiency of matrix manipulation, and generate new antibodies. Click here to read more

Diesel Prices Down Nine Straight Weeks: The national average price for diesel fell for a ninth consecutive week, slipping 2.3 cents to $4.105 a gallon, according to data released April 3 by the Energy Information Administration. The price of diesel fell in nine of EIA’s 10 regions, with the only increase coming in the Gulf Coast, with an uptick of a half-cent. The biggest drop was seen in California, where the price dropped 11.8 cents a gallon, but it remains the only region above $5 at $5.047. Diesel is now $1.039 a gallon cheaper than a year ago. The national average price for gasoline saw a significant jump of 7.6 cents a gallon to $3.497 a gallon, still 67.3 cents a gallon cheaper than a year ago. Source Transport Topics

ExxonMobil Going Greem and Planning to Make Big Bucks: ExxonMobil’s new low-carbon businesses could one day be more lucrative than its fossil fuel production, a top executive said, as the US oil major laid out ambitious plans to generate tens of billions of dollars from biofuels, hydrogen and carbon capture within a decade. The Texas-based oil producer on Tuesday gave investors the most comprehensive view yet of its energy transition plans, saying it expects to profit from carbon-cutting technologies even as it expands oil and gas output. Exxon's Dan Ammann told investors that the low-carbon business he runs could eventually be worth “hundreds of billions of dollars” and grow to be “larger than ExxonMobil’s base business is today as the world approaches net zero”. Source Financial Times

Job Openings Data Better But Still Well Ahead of Hires: Job openings fell in February to the lowest in nearly two years as the labor market trends towards the "better balance" Federal Reserve officials, including chair Jerome Powell, have been seeking. The latest Job Openings and Labor Turnover Survey, or JOLTS report, released Tuesday showed there were 9.9 million jobs open at the end of the month, down from 10.6 million in January and 11.6 million in the same month last year. Job openings peaked at over 12 million in March 2022 and since then, the U.S. economy has added 10.25 million new jobs. In other words, there were +4.0 million more job openings than unemployed workers in February vs. +6.1 million more job openings than unemployed workers in March 2022. This slowdown in the number of open positions also suggests the labor market is trending toward an equilibrium between supply and demand the Fed has seen as pushing wages and inflation higher in recent years. Source Yahoo Finance

Gen Z "Student Loan Cliff" Could Shock US Economy: Millions of Gen Z grads have never had to pay their monthly student loan bill, considering that federal payments have been paused for more than three years. That will change soon—and it will be a “shock” for many household budgets. That’s according to Jeffries, which warns of a coming “student loan cliff.” When payments resume for 45 million people, it’ll be the first time a sizable portion of those borrowers will be responsible for the hundreds of dollars each month. As Jeffries notes, that will be difficult when so many are already struggling with daily expenses. The average payment for those who are in good standing was close to $400 per month before the COVID-19 pandemic. Currently, they are scheduled to resume 60 days after the U.S. Supreme Court reaches a decision on President Joe Biden’s student loan forgiveness plan, or 60 days after June 30, whichever is first. Consumer spending is likely to slow when payments resume—and in turn, that will hurt the economy overall, Jeffries reports. It is also “almost certain” that delinquent payments for other types of debt will increase when households are squeezed even tighter. A February survey from Credit Karma found that more than half of respondents with federal student loans say their financial stability depends on not making payments. Source Fortune

Walmart Reaffirms Guidance as Its Customers Hold On: Walmart reaffirmed its first-quarter and current fiscal-year guidance on Tuesday, meaning America’s largest retailer hasn’t noticed a drastic change in consumer attitudes. The company is often considered a litmus test for consumer health, given its sheer size and scale, so any indications that the company was projecting a softer year would have been viewed by investors as a sign that consumers may be pulling back faster than expected. The guidance update was issued as part of the company’s two-day meeting with investors. The company highlighted three main drivers of growth in the release on Tuesday: diversifying its earnings streams, scaling high-return investments, and growing out its online and physical business model. Walmart also plans to invest heavily on its supply chain, and foresees that by fiscal 2026, roughly 65% of stores will be serviced by automation, and 55% of fulfillment center volumes will move through automated facilities. Source Barrons

Sunbelt Cities Top the List of Booming U.S. Job Markets: Music City, U.S.A., and America’s recreational-vehicle capital are the country’s hottest job markets, according to The Wall Street Journal’s annual rankings of nearly 400 metro areas. The Nashville, Tenn., metro area ranked as the best labor market in 2022, among regions with at least one million people. The Elkhart, Ind., area, about 100 miles east of Chicago, ranked as the best job market among smaller metros. It is home to several RV manufacturers and the region is also one of the country’s best housing markets. The rankings from The Wall Street Journal are based on Moody’s Analytics analysis of Labor Department data. In 2022, “the big picture story is just how persistent the strength of the Sunbelt, in particular, has been,” said Adam Kamins at Moody’s Analytics. That trend started before the pandemic, he noted. “And by most measures, those have remained the strongest performing economies in the U.S.” Of the 10 hottest city job markets — as ranked by Moody’s and the Journal — nine were in the South, in Tennessee, Texas, Florida, Georgia and North Carolina. The rise of remote work has been a big factor, said Glassdoor’s Daniel Zhao. However, in many of the cities with hot job markets, much of the hiring has been happening in restaurants, hospitality and tourism. “Industries that don’t necessarily rank very high on employee satisfaction or wages,” Zhao pointed out Source Marketplace

We have alternatives that are low in correlation to traditional stock & bond portfolios. They are liquid and transparent. Minimums and fee structures vary and some are performance based only. Returns we can share are NET of Fees.

If you want to learn more, just let me know what works to learn more about your needs.

Schedule A Call Now

Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.