Stock indexes start the week on a mixed note with bulls still struggling to find the next catalyst. Investors yesterday were digesting ISM Manufacturing that showed a significant pullback in the “prices paid” component, indicating that the surge in wholesale prices in Q1 2024 has lost steam. That’s good news for those wanting further confirmation that “disinflation” has returned but it’s not really enough to spark much momentum for the bulls.

The reports that hold the most sway over Federal Reserve policy expectations are the monthly jobs report, the Consumer Price Index, and the PCE Prices Index, which all overshot expectations in the first few months of 2024 but showed signs of slowing down in April.

Investors and the Fed alike want to see the softer data repeated before they are convinced that the inflation slowdown has returned. That means there is a lot riding on the May jobs report coming up on Friday and one reason investors are treading cautiously out of the gates this week.

Keep in mind, the Fed’s next policy meeting is next Tuesday-Wednesday (June 11-12) so data this week, and especially the May jobs report, will have an influence on the outcome. While virtually no one expects the Fed will cut interest rates, policy makers use the most recent economic data to inform their outlooks for the economy and Fed policy.

Next week’s Fed decision will be accompanied by updated economic projections, which includes the so-called “dot plot” that maps out where Fed officials expect the central bank’s benchmark rate will be in the short, mid, and long term.

Officials signaled in their March projections that they still saw -0.75 basis points worth of cuts in 2024, or three cuts of -25 basis points each. If the May jobs report shows a resurgence in hiring and/or wage inflation rebounds, it will make it more difficult for Fed officials to maintain that outlook.

Wall Street has already walked back its rate cut expectations to just one or two quarter-point cuts. Wall Street insiders also point out that we are coming off a Q1 earnings season that seems to have raised more questions than answers about the health of US consumers and the impacts of artificial intelligence on corporate earnings.

Earnings season and new record stock index highs both are typically followed by some degree of consolidation, and that does appear to be ongoing. Many bulls point out that seasonality may be a developing headwind for stocks as well. The summer months tend to be more volatile for stock markets, which many equate to lower trading volumes during a time of year when most Americans take their vacations.

Stocks also tend to deliver lower returns between May 1 and the end of October than the six-month period from November through April. The old Wall Street adage “sell in May and go away” stems from this seasonal trend. Research shows that stock market returns between May 1 and Halloween have averaged -4% points less per year than the returns over the winter half of the year.

Investors today will be digesting the Job Openings and Labor Turnover Survey (JOLTS) and Factory Orders. On the earnings front, Bath & Body Works, CrowdStrike, and Hewlett Packard are the highlights.

US manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years, and spending on construction projects slipped a bit the month before. Meaning that perhaps the economy is weakening a bit more than Wall Street bulls are willing to admit.

In case you are wondering, the market odds of two Fed -25 basis point rate cuts is currently the highest at just over 38%. The next highest odds are for one Fed -25 basis point rate cut at 35.5%. Next highest is three Fed rate cuts at just over 14%. And no Fed rate cuts is around 10% odds. 

It’s Crunchtime for a New Generation of Climate Startups:  Hundreds of young climate companies are burning through investor cash in the race to turn new technologies into big businesses and the transition period is called the “valley of death” because so few startups survive it. The success of at least some of these startups is crucial to the world’s efforts to limit climate change. But companies in their early stages are often derailed by blown budgets, engineering failures and any number of unexpected hazards. At stake are tens of billions of investor dollars and technologies aimed at reshaping swaths of the economy, such as cleaner fuels for ships and planes and longer-lasting batteries for electric cars. That is all while executives navigate uncertainty about interest rates, trade policy and government subsidies. A previous funding boom for clean technology ended badly. After pouring $25 billion into the sector between 2006 and 2011, venture capitalists lost more than half that by 2015 after many startups failed. More recently, a wave of clean-energy startups that went public during a 2020 and 2021 fundraising peak collapsed. Electric-vehicle startups Fisker and Lordstown Motors are among those that filed for bankruptcy or are teetering on the edge. Building any startup is one long valley of death with occasional breaks, said David Yeh, a climate-technology investor and former adviser in President Obama’s White House. For many companies, he said the most treacherous time is building the first factory  Source WSJ

New Study Shows That Americans Are Spending on Average 2.5 Hours a Day Dreamscrolling: According to the study by Empower, a financial services company, Americans are spending an average of 2.5 hours a day, or 873 hours a year dreamscrolling, meaning looking at dream purchases or things they’d like to one day own.on the phone or computer. Half of the 2,000 respondents to the study said they dreamscroll while at work and of those, 1 in 5 admit to spending between three to four hours a day multitasking while on the job. Gen Z'ers spent the most time dreamscrolling at a little more than three hours per day, while Boomers spend the least, or about an hour. The majority of those who responded, or 71%, however, said that dreamscrolling  is time well spent because it motivates them to reach their financial goals.  Source USA Today

Mexico Elects Its First Woman President:  Claudia Sheinbaum made history Sunday after becoming the first woman to be elected president of Mexico. Her election marks a groundbreaking achievement in a country with a strong culture of machismo and high rates of violence against women. She has also made history as the first Jewish person to be elected president of the predominantly Catholic country. Sheinbaum, a climate scientist and former mayor of Mexico City, will have the chance to put her stamp on Mexico's climate and immigration policies once she takes office on Oct. 1. Sheinbaum was born in Mexico City in 1962 to parents who both worked in the sciences, per the New York Times. Both sets of Sheinbaum's grandparents were Jews who immigrated to Mexico from Lithuania and Bulgaria, per the Times. Sheinbaum is married, has two children and received her degree in physics at the National Autonomous University of Mexico before moving on to earn a PhD in energy engineering. In 2006, she joined the UN's Intergovernmental Panel on Climate Change, becoming a member of the team that would win the Nobel Peace Prize the following year, CNN reported. Sheinbaum first entered politics in 2000, when outgoing Mexican President Andrés Manuel López Obrador, then the newly-elected mayor of Mexico City, appointed her to be his environment secretary. Read more on Sheinbaum's plans at  Axios. Don't forget Mexico became the top US trading partner at the beginning of 2023. Source Federal Reserve Bank of Dallas

Housing Affordability Is Gen Z’s Top Voting Issue: More than nine in 10 (91%) adult Gen Zers say housing affordability is important when considering who they will vote for in the upcoming presidential election, making it the top issue for that generation. Gen Zers were more likely to rate housing affordability as an important factor in their vote than any other issue they were asked about, including the economy, abortion and gun rights, preserving democracy, and foreign wars. This is according to a Redfin-commissioned survey of roughly 3,000 U.S. homeowners and renters conducted by Qualtrics in February 2024. Millennials, Gen Xers and baby boomers were all more likely to say the strength of the overall economy was an important factor in their presidential pick than any other issue. Gen Xers and baby boomers also ranked preserving democracy above housing affordability. Still, at least 80% of every generation said housing affordability is an important factor.  Source Redfin


Sam’s Club to Start Selling Local Goods: Sam’s Club plans to sell more region-specific products such as ghee and hot sauce starting this fall — a bid to attract new members and better compete with Costco Wholesale Corp. Sam’s Club recently hosted its first-ever open call with local suppliers in Texas as it searches region-specific products to sell in stores across the state. More than 350 suppliers showed up and the company selected about 20 of them, including Culinary Cowgirls queso and Yellowbird hot sauce. The products will be in Texas stores later this year. Executives said this will give the retailer community-specific relevance. The next open call for local suppliers to make a pitch to Sam’s Club is planned for California, with other states following. Local products that the company picks up will primarily be in the food and consumables categories.  Source Bloomberg

This Legendary Coach Wanted a Horse Instead of a Raise: John Cook, the longtime coach of the University of Nebraska’s vaunted women’s volleyball team, had a peculiar request when he was negotiating his latest contract. He wasn’t asking for more money, more vacation time or the use of a private jet. He wanted a horse. And not just any horse. Cook had his heart set on what he described as a “once-in-a-lifetime performance horse” called No. 415, named for the number branded on his body as a colt. So on a recent telephone call with his boss, Cook laid out his conditions: He would forgo the annual raises that are customary for someone in his position, if the school would facilitate the purchase of the horse he coveted. Last week, Nebraska agreed. Cook will now remain at the helm of the Cornhuskers for at least the next five seasons—and No. 415 will soon be a part of his family. Source WSJ

Couple Reels in $100,000 Cash While Magnet Fishing: A New York City couple known on social media for their magnet fishing exploits in local waterways says they recently reeled in an unexpected find: a safe holding two stacks of waterlogged hundred dollar bills. James Kane and Barbie Agostini, who have chronicled a variety of magnet fishing discoveries on their YouTube channel, told Spectrum News NY1 on Saturday that after reeling in a muddy safe from a Queens pond on Friday, they were shocked to find stacks of hundred dollar bills estimated to be worth $100,000. Kane said they contacted the NYPD because he thought there may be some "legalities" involved. Because the owner of the safe, which was likely stolen, could not be identified, Kane and Agostini said police allowed them to keep the saturated stash.  Source CBS News

Kids Aren’t Using AI Daily…Yet: Young Americans are quickly embracing generative AI as a tool, but few have yet made it a part of their daily lives, according to new data shared exclusively with Axios from Common Sense Media, Hopelab and the Harvard Graduate School of Education's Center for Digital Thriving. Since the rise of the web 30 years ago, young users have typically adopted and shaped each new dominant tech platform. The survey found that only 4% of respondents, all aged 14-22, said they use AI tools daily or almost daily. 41% said they've never used AI, and another 8% said they don't know what AI tools are. The two most common uses for AI, the survey found, were getting information (53%) and brainstorming (51%). Source Axios


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