Commentary

Forward guidance from chipmakers and others in the tech sector have not been as “dazzling” as many were hoping. Remember, even though expectations were very high for tech companies, many on Wall Street were still looking for big beats across the board. In other words, the AI hype may have gotten a little ahead of itself and investors are now having to rethink their price targets.

For what it’s worth, tech stocks only make up around 19% of the Dow, while they account for 30% of the S&P 500 and over 55% of the Nasdaq. Broadening the rally beyond tech is ultimately viewed as a positive, as opposed to just a handful of stocks driving the market. Some Wall Street insiders also note that more money is moving into so-called “defensive” stocks amid concerns that consumer spending is slowing down.

Traders are pointing to gasoline demand that has slumped to the lowest levels in two months, as well as warnings from numerous companies this earnings season that consumer budgets are under pressure.

There is even talk of possible recession starting to circulate again, though this is definitely still a minority view.

Today is pretty quiet with Enbridge the main earnings highlight and Consumer Sentiment the only thing on the data front.

There hasn’t been much economic data to shift investor sentiment this week but next week is pretty loaded.

The Producer Price Index (PPI) on Tuesday and Consumer Price Index (CPI) on Wednesday will be the first look at April inflation. Retail Sales on Wednesday is also a top highlight.

Other data of note includes Empire State Manufacturing on Wednesday; Housing Starts & Permits, Industrial Production, Philadelphia Fed Index, and Import/Export Prices on Thursday. Earnings next week include several key retailers that should shine more light on the health of US consumers.

The top highlights will be Home Depot and On Holding on Tuesday; Cisco on Wednesday; and Applied Materials, Deere & Co. and Ross Stores on Thursday. 

Where the Class of 2024 Wants to Work:  Tech jobs are still leading the way, but a larger percentage of this year's graduating college seniors are seeking the security of a government job, with fewer applying to risky-seeming tech jobs, per Handshake, the campus recruitment website. Job security, work/life balance, and the ability to live near family and friends are the top considerations for the class of 2024, Handshake's opinion survey and job applications data show. In fact, 76% of this class says stability is the #1 factor they'll be considering, Christine Cruzvergara, Handshake's chief education strategy officer, tells Axios. In summary, 7.4% of applications submitted on Handshake from this year's graduating class were for government roles, up from 5.5% last year. Tech still leads the way with 21% of applications applying for tech jobs, down from 23% last year. It should be mentioned that a lot of the young people seeking to work for Uncle Sam are also targeting tech roles. New York City is the most popular destination for Class of 2024 applicants, attracting 9.1% of total applications, up from 8% last year. Other cities seeing the biggest increases in the share of job applications were Washington, D.C.; Texas City, Texas; Salt Lake City, UT, and Boise, ID. Source Axios

The Great Consumer Trade Down: Consumers eager to save amid persistently high inflation are increasingly turning to cheaper goods and services. Low priced items are accounting for a significantly higher share of online unit sales in numerous product categories compared to five years ago, according to Adobe Analytics data. In personal care, the share of purchases coming from the cheapest quartile of goods jumped +96% from January 2019 to April 2024, the firm found. Similar jumps were seen in electronics (+64%), apparel (+47%), home/garden (+42%), furniture / bedding (+42%), and grocery (+33%). "Within a category like groceries, the data showed that goods with low inflation saw revenue grow by +13.4%, while products with high inflation saw revenue drop by -15.6%," Adobe reported. A slew of companies have noticed the shift, including Amazon, where CEO Andy Jassy noted on an earnings call: "Customers are shopping but remain cautious, trading down on price when they can and seeking out deals." Source Axios

“Seriously Underwater” Home Mortgages Tick Up Across the US: Roughly one in 37 homes are now considered seriously underwater in the US and that share is much higher across a swath of southern states, according to data out Thursday. Nationally, 2.7% of homes carried loan balances at least 25% more than their market value in the first few months of the year. That’s up from 2.6% in the previous quarter, according to the first-quarter 2024 US Home Equity & Underwater Report from ATTOM, a real estate data firm. While the share of these homes is ticking up, it remains much lower than before the pandemic, when the rate was more than twice as high. Several southern states saw shares of seriously underwater homes grow more than the rest of the country. Kentucky’s share jumped to 8.3% in the first few months of the year from 6.3% in the previous quarter. West Virginia’s share rose to 5.4% from 4.4% over the same period, while Oklahoma climbed to 6.1% from 5.5%, and Arkansas went up to 5.7% from 5.2%. The states with the biggest increase in number of seriously underwater homes are also in the south. Kentucky is in first place with a year-over-year jump of more than 20,500 homes - nearly twice as many as second-place Mississippi and Oklahoma, coming in third.   Source Bloomberg

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Companies Can't Issue Debt Fast Enough: From the US to Europe to Asia, companies — some of which found themselves shut out of the new issuance market not so long ago — are seizing on strong investor demand and a lack of clarity around where funding costs are headed to issue the most debt in years. More than 40 investment-grade firms in the US have sold $53 billion of bonds this week through Wednesday, the most crowded three-day calendar since 2021, while high-yield issuers have priced nearly $11 billion, according to data compiled by Bloomberg. Despite a slew of holidays in Europe, blue-chip and junk-rated issuers have priced around $23 billion, including a cadre of riskier deals. Stateside, investment-grade issuance through Wednesday surpassed the 39 deals that priced during the first week of the year. High-yield bond sales are also proceeding at a frenetic pace. Thirteen borrowers have priced $10.8 billion. Even the municipal bond market is showing signs of the enthusiasm. Illinois sold $1.8 billion of bonds Wednesday, a day earlier than expected, helped by investors’ hunger for yield amid a rally in munis. “There is an emerging confidence in the market around the sectors and credits which are better positioned to deal with higher-for-longer, because investors now have 18 months of performance data within a generationally high rate environment to work with,” said Murad Khaled, head of EMEA leveraged finance capital markets at Bank of America Corp. Source Bloomberg

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 Hospitals Are Refusing to Do Surgeries Unless You Pay in Full First: For years, hospitals and surgery centers waited to perform procedures before sending bills to patients. That often left them chasing after patients for payment, repeatedly sending invoices and enlisting debt collectors. Now, more hospitals and surgery centers are demanding patients pay in advance. Advance billing helps the facilities avoid hounding patients to settle up. Yet it is distressing patients who must come up with thousands of dollars while struggling with serious conditions. Those who can’t come up with the sums have been forced to put off procedures. Some who paid up discovered later they were overcharged, then had to fight for refunds. Among the procedures that hospitals and surgery centers are seeking prepayments for are knee replacements, CT scans and births. Still, finding money for treatment is a challenge for many American households. In addition, determining how much a patient will owe can be tricky. How much each patient pays depends on their health plan, its deductible or other out-of-pocket costs and the prices the plan negotiated with a hospital to pay.  Source WSJ

A Look at Small Businesses in the US: Most U.S. adults (86%) say small businesses have a positive effect on the way things are going in the country these days, according to a recent Pew Research Center survey. Small businesses, in fact, receive by far the most positive reviews of any of the nine U.S. institutions asked about, outranking even the military and churches. Despite their name, small businesses loom large in the United States. These businesses – defined here as those with 500 employees or fewer – account for 99.9% of U.S. firms, according to the Small Business Administration. While most of these 33 million firms don’t have paid employees, about 6 million of them do. They account for just under half of total private sector employment (46%). Among the roughly 6 million small businesses with employees, 49% have just one to four workers, according to the latest estimates for 2021 from the Census Bureau’s Annual Business Survey (ABS). Overall, small businesses employed an estimated 56.4 million workers in 2021 and brought in over $16.2 trillion in revenue, according to ABS data. Some small businesses are family-owned (27%), but the vast majority are not (73%). Many small businesses have stood the test of time. In 2021, the majority of these firms (59%) had been operational for at least six years, according to the Census Bureau’s Business Dynamics Statistics. This includes 15% that had been in business for more than 25 years. Source  Pew Research.

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