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Stock bulls may be taking a moment to catch their breath after rallying indexes to new record highs last week. There is really not much on the calendar the next few days that’s likely to generate much excitement, either.
Bulls continue pointing to the same supportive tailwinds of looming Federal Reserve interest rate cuts, a strong US job market, and resilient consumers that are expected to contribute to strong earnings growth in the quarters ahead.
However, with stocks at what some consider stretched valuations, this narrative may not be enough to propel stocks a great deal higher, so some bulls may start to question risk-to-reward. As I always say, bulls need to be fed and this week might leave them a bit starved for headlines.
Bears, however, week continue to raise alarms about tech stocks being over-valued and warning that the outsized profits generated in recent quarters are not sustainable, particularly new more competitors rapidly entering the space. Some bears are also reviving warnings about the possibility of “stagflation,” pointing to recent data that shows the economy is still cooling down but inflation is also holding on and maybe even heating up again in certain sectors.
Energy prices are main area of concern as Russian oil and gas supplies have been reduced due to attacks on its infrastructure by Ukraine. Now, Russia has ordered companies to reduce output in the second quarter to ensure the country meets its production cut pledges under OPEC+. Oil traders see the order as a signal that OPEC will go ahead with its planned cutbacks. Governing members of the group meet on April 3 to assess the cuts that are scheduled to be in place through the end of June. Members have agreed to reduce production by -2.2 million barrels per day (bpd) this quarter.
The cuts come despite the fact that more analysts are forecasting tight global oil supplies as the outlook for most major economies improves. Goldman Sachs is among those expecting rising demand, and in turn higher prices for crude oil. In fact, Goldman analysts see rising commodity demand across the board as interest rate cuts by global central banks spurs a recovery in manufacturing and stimulates consumer demand.
The bank sees potential commodity returns as high as +15% with the biggest boost forecast for metals (copper and gold in particular), followed by crude oil. If that forecast holds, it could obviously pose more challenges to the “disinflation” trend that has largely stalled out this year.
Today, investors will be digesting the Case-Shiller and FHFA Home Price Indexes, as well as Durable Goods Orders, Consumer Confidence, and Richmond Fed Manufacturing. On the earnings front, GameStop and McCormick are the highlights. Staying conservative! New Home Sales and Prices Decline as Supply Hits Highest Level Since 2022: New-home sales in the US unexpectedly fell in February for the first time in three months, suggesting an uneven recovery for the housing market. Purchases of new single-family homes decreased -0.3% to a 662,000 annual pace last month, government data showed Monday. The Commerce Department’s report also showed the median sales price of a new house decreased -7.6% from a year ago to $400,500 in February. Meanwhile, the supply of new homes rose to 463,000 during the month, the highest since October 2022. In fact, the number of new homes for sale that are already completed rose in February to the highest since September 2010. “The benign explanation is that builders have ramped up in anticipation for a stellar spring selling season,” Stephen Stanley, chief economist at Santander US Capital Markets LLC, said in a note. “If not, builders could be forced to pull back on building activity later this year.” Source Bloomberg
The Average Age of Seniors to Give Up Driving is 75: How old is too old to drive? AARP says the average age for seniors to give up driving is 75, but that surely is a moving target as the Baby Boomer wave ages in better health and 75 becomes "the new" 55 or 65. We all know people who drive safely beyond 75. Vision impairment may be the thing that most risks older Americans losing their license. Nearly 50 million people 65 and older held driver’s licenses in 2021, a 38% increase from 2012, according to data compiled by the American Automobile Association. Almost 19 million were 75 or older, a rise of 31%. During this period, motor vehicle deaths for people 65 and older increased 34%, reaching 7,489 in 2021. The number of seniors injured in vehicle crashes that year exceeded 266,000. While several states require license renewals and vision tests at shorter intervals as we age, only two states — Illinois and New Hampshire — require all renewing license holders age 75 and older to re-take a road test. Some are saying many state laws are going to change and start requiring stricter guidlines on those +75 and older Source Auto Blog
New Data Shows Hidden Labor Market Weakness: Unemployment rates have risen in some of America's most populous and politically important states — a sign there are more pockets of weakness in the labor market than national figures suggest. Instead of the coast-to-coast job boom that shaped the pandemic recovery, the job market now looks more uneven, with parts of the country missing the plentiful job opportunities available in other states. "We actually don't have one labor market; we have a whole collection of labor markets," says Indeed economist Nick Bunker. While the national unemployment rate is low, there are notable regional variations, he adds. The unemployment rates in 28 states, including three of the six most populous, were higher in February than a year earlier by a statistically significant amount. The highest-population state, California, now has the highest unemployment rate, at 5.3%. Nevada is close behind, at 5.2%. Just three states had lower jobless rates at the end of that period, while unemployment held steady in the other states, according to federal data released Friday. Robust national job growth numbers also mask a geographical split: Half of the country saw job growth over the year, while payrolls were flat in the other 25 states. Source Axios
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Chik-fil-A to Allow Some Antibiotics in Chicken: Chick-fil-A will shift to allow some antibiotics in its chicken starting this spring, overturning a 2014 commitment to use only antibiotic-free chicken. "To maintain supply of the high-quality chicken you expect from us, Chick-fil-A will shift from No Antibiotics Ever (NAE) to No Antibiotics Important To Human Medicine (NAIHM) starting in the Spring of 2024," an update on the restaurant chain's website on Thursday said. According to the announcement, chicken antibiotics will only be used "if the animal and those around it were to become sick." The antibiotics used to treat the poultry are not intended for humans. The company said that “the availability of high-quality chicken that meets our rigid standards became a concern.” The move follows announcements made by several other companies. In 2023, Tyson Foods, the largest chicken producer in the United States, also moved away from its 2015 pledge of "no antibiotics ever." Source USA Today
Intel, Google Among Coalition Aiming to Break Nvidia’s Grip on AI: Nvidia earned its $2.2 trillion market cap by producing artificial-intelligence chips that have become the lifeblood powering the new era of generative AI developers from startups to Microsoft, OpenAI and Google parent Alphabet. Almost as important to its hardware is the company’s nearly 20 years' worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia's CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm, Google and Intel plans to loosen Nvidia’s chokehold by going after the chip giant’s secret weapon: the software that keeps developers tied to Nvidia chips. They are part of an expanding group of financiers and companies hacking away at Nvidia's dominance in AI. Starting with a piece of technology developed by Intel called OneAPI, the UXL Foundation, a consortium of tech companies, plans to build a suite of software and tools that will be able to power multiple types of AI accelerator chips, executives involved with the group told Reuters. Source Reuters
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