Stock indexes are poised to close out a winning week, month, and quarter. Remember, stock and commodities markets are closed tomorrow in observance of Good Friday. As it stands right now, the S&P 500 is up more than +10% so far in the first quarter/year-to-date. The Nasdaq is up over +9% while the Dow is up more than +5% for year so far.

The strong gains that stock indexes are already sitting on remain a topic of hot debate, as in how much higher can they climb? Headlines about a “stock bubble” and “AI mania” are easy to find, even though most stock insiders continue to raise their year-end targets, some of them multiple times now.

For what it’s worth, the S&P 500 has set over 20 new record closing highs this year, including yesterday with a close above the 5,200 level. Very few big Wall Street bank analysts see the S&P 500 ending the year lower, but among them are JPMorgan and Morgan Stanley which forecast the index ending 2024 at 4,200 and 4,500, respectively.

The bears at JPMorgan are warning “that excessive crowding in the market’s best-performing stocks raises the risk of an imminent correction.” That’s similar to what other bears have been banging their drums about all year, particularly the concentration in AI-related tech stocks.

Bulls still see the winning combination of Fed’s imminent rate cuts, steady economic growth, and a strong consumer allowing plenty of room for stocks to move higher.

Today, investors will be digesting the final estimate of Q4 2023 GDP (gross domestic product), Pending Home Sales, and Consumer Sentiment. Walgreens is the main earnings highlight. Unlike stocks, banks and the Federal government are open on Friday, meaning bond markets are open, though they do close early at 1 p.m. CST. That also means that economic data will be released as regularly scheduled tomorrow.

The top highlight is the PCE Prices Index, which is expected to show a slight increase in headline inflation to +2.5% from +2.4% previously while the “core” rate (strips out food and energy) holds steady at +2.8%. If realized, the reads would be in line with other February inflation data released earlier this month. Meaning investors are already aware that the “disinflation” trend stalled for a second month in February so an as-expected PCE Prices will not likely impact investor sentiment.

Other data tomorrow is all advance reads on International Trade, Retail Inventories, and Wholesale Inventories.

Tomorrow will also bring remarks from Federal Reserve Chair Jerome Powell, who is participating in a discussion at the Federal Reserve Bank of San Francisco’s “Macroeconomics and Monetary Policy Conference.”

Bottom line, Friday will be a fairly eventful day despite the markets being closed, which could set Monday up for some added volatility.

Keep in mind that Monday will also be the first trading day of a new month (April) and new quarter (2nd). The data calendar next week is also pretty packed and includes the highly anticipated March Employment Report due out next Friday.

ISM Manufacturing on Monday is also a top draw with investors very anxious to see how wholesale prices are trending. The “Prices Paid” component has spiked since the start of the year, raising concerns that even higher consumer prices may soon follow.

Construction Spending is also due out on Monday. The rest of the week’s data includes Factory Orders on Tuesday; ADP’s Employment Change and the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday; and Consumer Credit on Friday.

Earnings next week include CalMaine, Dave & Busters, and Paychex on Tuesday; Levi Strauss & Co. on Wednesday; and Conagra on Thursday.

I should note, that the trade is now thinking there's about a 15% chance that the Fed could cut rates by -25 basis points at its next two-day FOMC meeting scheduled to begin on April 30th. On the other hand, the trade is giving between 75% and 80% odds of the first Fed -25 basis point rate cut happening at its June 11th and 12th FOMC meeting.

For what it's worth, the 30-year fixed mortgage is now averaging just below 7.0%. 

American Business Stalls in China:  The decadelong push by American companies into China is stalling as American firms in China are being squeezed by escalating geopolitical tensions, tit-for-tat measures on trade and exports, and China’s drive for self-sufficiency. Meanwhile, the Chinese market is becoming less attractive. The country’s economic growth fell to its slowest rate in decades last year; consumers there are spending less, especially on foreign brands; and its once-unstoppable export machine is faltering. The result is many multinational companies are sending less from China, exporting fewer products there and seeing declines in their revenue from the country. The changes have prompted some firms to reduce their investment in China. American and other multinational firms had accounted for more than half of exports out of China. Now they make up less than a third. Many multinational companies have seen their revenue from China slide recently. The share of all company revenues earned in China belonging to U.S. firms fell to 10% in 2020 from 16% in 2006, according to the McKinsey Global Institute.  Source WSJ

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Half of Americans Say Religion Is Losing Its Influence:  More than three-quarters of Americans say religion's role in public life is shrinking, per a recent Pew Research Center survey, the highest level since the group first started tracking such sentiment in 2001. Many Americans are unhappy about that, with about half of adults telling Pew both that religion is losing influence and that this is a bad thing. About 57% of adults say that religion has a positive impact on American life, per Pew. Nearly half of U.S. adults say they feel at least some tension between their religious beliefs and mainstream culture, Pew found. That's up from 42% in 2020. A separate Gallup survey published this week found that Latter-day Saints are the only religious group wherein a majority say they attend services weekly, at 54%. 30% of Protestants say they attend services weekly, compared to 28% of Muslims, 23% of Catholics and 16% of Jews. Religious service attendance has been dropping for decades, per Gallup, driven largely by the increase in the percentage of Americans with no religious affiliation.  Source WSJ Axios

Remote Workers Who Switch to In-Office Jobs Boost Pay as Much as +30%: Getting people back to the office comes with a steep price tag — and those willing to swap their remote job for working in an office full-time could see the biggest change in their paychecks. Salaries for fully in-office roles are climbing in the United States. Companies are offering an average $82,037 for in-person roles, a nearly 40% jump from what these roles paid in 2023 ($59,085), according to ZipRecruiter data provided to CNBC Make It. Wages for remote and hybrid jobs haven’t grown nearly as much. As of March 2024, hybrid roles pay $59,992 on average, in 2023, that number was $54,034, ZipRecruiter reports. Remote jobs now pay $75,327, but in 2023, they paid an average $69,107. ZipRecruiter’s research is based on job listings from its platform and survey responses from more than 1,500 U.S. adults who started new jobs in 2023. Those who switched from a remote job to an in-office job last year received a 29.2% pay bump — nearly double that of those who left an in-person job to work remotely. By comparison, job switchers who leave one remote role for another receive a 22.1% pay bump, while those who switch between in-office roles see a 23.2% increase in their salaries. Source CNBC

China's Industry Ramp-Up Is Distorting World Economy: US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit. “There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.” The Treasury chief was speaking from Norcross, Georgia, where she’s showcasing the reopening of a US solar-cell manufacturing facility that had shut in 2017 under the pressure of “cheap imports flooding the market.” China’s industrial policy has a track record of causing “substantial overinvestment,” Yellen said in remarks prepared for delivery during her trip. She cited aid to industries including steel and aluminum that supported China’s production and employment “but forced industry in the rest of the world to contract.” Yellen also made clear that the US wasn’t alone in complaining about industrial overcapacity in China, saying “we see, of course, the same concerns in Europe.” Faced with a powerful drag on growth from a crisis in China’s real estate sector, President Xi Jinping and his lieutenants have been prioritizing the manufacturing sector. The “new three” growth drivers of electric vehicles, batteries and renewable energy have been a particular focus, along with advanced technology semiconductor production. Source Bloomberg

Judge Denies Coinbase Motion to Dismiss SEC Lawsuit: A federal judge on Wednesday denied Coinbase’s motion to dismiss a Securities and Exchange Commission’s lawsuit that alleges the crypto exchange violates investor-protection laws. U.S. District Judge Katherine Polk Failla’s ruling allows the SEC to move forward with its case that Coinbase operated as an unregistered intermediary of securities and engaged in the unregistered offer and sale of securities through its staking program, which lets investors earn interest on their crypto tokens. However, she agreed to dismiss the claim that Coinbase acted as an unregistered broker through its crypto wallet, which connects traders to liquidity on other trading platforms. Wednesday's ruling means that the SEC's case against Coinbase can move to discover. Source WSJ

Three Reasons Why Oil Prices are Incredibly Stable: Shouldn’t oil prices be surging? War has returned to the Middle East. Tankers in the Red Sea—through which around 12% of seaborne crude is normally shipped—are under attack by Houthi militants. And OPEC, a cartel of oil exporters, is restricting production. Antony Blinken, America’s secretary of state, has invoked the spectre of 1973, when the Yom Kippur war led to an Arab oil embargo that quadrupled prices in just three months. But oil markets have remained calm, trading mostly in the range of $75 and $85 per barrel for much of last year. There have been exceptions. Brent crude ticked above $85 per barrel last spring after OPEC+ said it would cut production. When Saudi Arabia extended its production cuts in September, prices reached almost $100. The market rose again after Hamas attacked Israel on October 7th. Yet each time prices quickly returned to that $75-$85 range. There are three reasons why traders expect this trend to continue in 2024. The first is supply. Oil production is now less concentrated in the Middle East than it has been for much of the past 50 years. The region has gone from drilling 37% of the world’s oil in 1974 to 29% today. Growing output from non-OPEC countries such as Guyana, which produced record volumes of crude last year, is also helping to diversify supply. The International Energy Agency (IEA) reckons that new sources, along with increased volumes from America and Canada, will cover most of the growth in global demand in 2024. Another reason for calm is OPEC members’ ample spare production capacity.  Source The Economist


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