Weekend Analysis

The short trading week wrapped up on a better note despite the low volumes of activity and the unusual event of having the NFP being published on a non-trading day. 

The recent turmoil in the banking industry has continued the shift of funds into money market funds. with about $49.1 billion being poured into U.S. money market funds in the week of April 5 to a record $5.25 trillion.

It was a quiet week for the FED mouthpieces, with only the St. Louis Fed President Bullard saying anything of note and supportive for stocks when he said incoming Q1 economic data is stronger than expected and inflation has declined but remains too high. He also added that "financial stress seems to be abated, at least for now, so it's a good moment to continue to fight inflation and try to get on that disinflationary path."  The Market took this as a positive, especially bank stocks which rallied as a result despite the comments the previous day from JPMorgan CEO Dimon who stated the U.S. banking crisis is not yet over and will be felt for years. The cynic in me suggest Dimon is laying the foundation for what will be poor Q1 results from JPM when they are announced on Friday 14APR. 

On the Econ Data we had the NFP hanging over the markets head for the week and when the data was released it showed the March NFP rose 236K vs. forecasts of 230-240K. The unemployment rate unexpectedly fell to 3.5% with a rise in the participation rate to 62.6%.

In other Econ data, the Feb factory orders saw a drop of 0.7% m/m, weaker than expectations of 0.5% drop m/m, the MAR ISM services index also dropped by 3.9 to 51.2, weaker than market expectations of 54.4 and the weekly unemployment claims dropped by 18k to 228k, showing a weaker labour market than expectations of 200k. And finally, in more bad news, the Feb trade deficit expanded to $70.5 billion, wider than expectations of $68.8 billion and the most in 4 months, which has negative implications for Q1 GDP.

Data released this week on job openings and the service sector helped reinforce the notion that the U.S. economy is slowing more quickly than previously expected, which has helped to stoke worries about slowing corporate earnings ahead of the start of the first-quarter earnings season. 

For our major indexes, both the S&P and the Nasdaq posted a Red week to halt a 3 week Bull run. DoW on the other hand just scraped in a Green week.  Nasdaq's drop is the only one worth of note dropping over 1% but remaining above the multi zone support of its WVI/50MA/RN12k. We had low volumes during the week and this was reflected in the actual range for all three indexes being relatively small.

The volatility index continued its recent decline to post a 3 week Bear run. The index is also comfortably below the RN20, despite a weak attempt at popping its head above this early in the week. Short selling saw an increase for the week and has established a pattern of alternate Red/Green weeks since mid Feb. 

In UK the private sector economy maintained its place in the growth territory for the second month in a row, thanks to softening inflationary pressures and improving client demand. Despite the recent surge in the GBP strength which weighs heavily on the blue chip index, the FTSE maintained its resurgence in recent weeks to post a 3 week bull run but is now faced with its d50MA Res above.  

As has been mentioned many times, the CABLE has a behaviour of being gutless when its comes to BO of its Res zones with confidence and once again its recent resurgence has been halted by the RN1.25 & dCAT above. This was the pairs third attempt since DEC22 to breach this zone. The pair is however on a 4 week bull run and has just closed out the week at the highest point in 10 months. This week the pair has posted what seems like a BuF and I would like to see a BuRPI at its base near the d20MA supp to then potentially spring off this zone to breach the Res zone and continues its resurgence upwards. In other FX news that will affect the CABLE, the New Zealand central bank's unexpected 50-basis-point rate hike rattled investors at a time when recent signs of resilience in the UK economy have bolstered expectations of further interest rate rises domestically.

The Sector ETF's was a mixed bag of performers with a slight bearish look with 6 of the 11 sectors posting a Red week led by Industrial (XLI) and Discretionary (XLY). Both the HealthCare(XLV) and Utilities (XLU) fought out a battle to be the weeks best performer with the former just edging out in front by 0.01% to post a 4 week Bull run - fine margins! Though I'd give the benefit to Utilities which had the DVI Res above to contend with. 

Consumer Staples (XLP) continues to go about its business quietly in the shadows to post another green week to match Healthcare's (XLV) bull run. 

Earning season will begin in earnest next week, with JPMorgan, Citigroup and Wells Fargo set to release their quarterly results on Friday. So far the estimates aren't looking too great with the S&P 500 companies projected to report earnings falling by 7.2% in the first quarter from a year ago. This would mark the biggest decline since the second quarter of 2020, when S&P 500 earnings fell by 32%. If these numbers hold, we will have a streak of at least two consecutive quarters of shrinking profits which would also mark the start of an earnings recession. This could pressure stocks, which have yet to regain their highs from last year, despite recovering some losses so far in 2023. 

We have key Econ Data being released next week with the US publishing its key inflationary data thru CPI, PPI & Retail Sales, additionally we will have the FOMC minutes on Wednesday. Elsewhere, the UK will publish its monthly GDP and have its BOE Gov Bailey speaking at the Institute of International Finance about the resilience of the Global financial system. And in Canada we will have the BOC Monetary policy and rate decision for CAD. 

With the long weekend to reflect on the NFP and other Econ data, together with the start of the Q2 earning seasons, markets reaction on Monday will be interesting. 

Hope you all have a great long Easter weekend. For this in Surrey, hope you're enjoying the long awaited sunny weather!

Anil

Let's go trade!