It was a volatile week as traders weighed the likelihood of fewer FED rate cuts this year against strong jobs data. Major stock indices with the exception of emerging markets ended the week lower.
Many private economists and some FED officials are now predicting fewer than the three rate cuts in 2024 that were indicated in the FED’s dot plot. Supply chain disruptions in the port of Baltimore and the Red Sea coupled with higher oil prices may cause the FED keep rates higher for longer. Mexico announced cuts to its oil exports, interpreted to be a political move to lower domestic fuel prices before the June 2nd election. This, coupled with the U.S. reinstating Venezuelan oil sanctions and OPEC+ cuts, are expected to drive crude oil prices higher. Also contributing to higher fuel prices will be fewer exports from Russia due to refinery attacks. Fed Chair Powell this week stressed the need to see more progress on inflation before considering cuts and Atlanta Fed President Bostick predicted only one rate cut in the 4th quarter and .
Treasury bond yields rose with the 30-year bond yield at 4.554% and the 10-Year note at 4.403%. Freddie Mac reported that the average 30-year mortgage rate rose to 6.82%. Crude oil rose to $86.67 a barrel and natural gas rose to $1.779 per MMBTUs. The U.S. dollar index rose to 104.30 and gold rose to $2342.60 an ounce.
In economic reports this week:
- The S&P Global released its purchasing manager indices for March. Keep in mind that anything over 50 represents expansion and anything under 50 represents contraction.
- U.S. manufacturing PMI fell from 52.2 to 51.9.
- U.S. services PMI fell from 52.3 to 51.7.
- Mexico manufacturing PMI fell from 52.3 to 52.2.
- Canada manufacturing PMI rose from 49.7 to 49.8.
- Canada services PMI fell from 46.6 to 46.2.
- China manufacturing PMI rose from 50.9 to 51.1.
- China services PMI rose from 52.5 to 52.7.
- Japan manufacturing PMI rose from 47.2 to 48.2.
- Japan services PMI rose from 52.9 to 54.1.
- Eurozone manufacturing PMI fell from 46.5 to 46.4.
- Eurozone services PMI fell from 46.5 to 46.1.
- The Commerce Department reported:
- Construction spending fell 0.3% in February after falling 0.2% in January but is up 10.7% from last February.
- Construction spending fell 0.3% in February after falling 0.2% in January but is up 10.7% from last February.
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- New orders for manufactured goods rose 1.4% in February after falling 3.8% in January.
- New orders for manufactured goods rose 1.4% in February after falling 3.8% in January.
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- The trade deficit rose 1.9% in February as both imports and exports rose.
- The trade deficit rose 1.9% in February as both imports and exports rose.
- The Labor Department reported:
- The U.S. added a robust 303,000 new jobs in March.
- The unemployment rate fell to 3.8%.
- Hourly earnings rose 0.3% and are up 4.1% from a year ago.
- Seasonally adjusted first-time claims for unemployment were 221,000, an increase of 9,000 from the previous week’s revised level.
- The 4-week moving average of claims, designed to smooth out volatility, was 214,250, an increase of 2750 from the previous week’s revised level.
- For the full unemployment report go here: https://www.dol.gov/ui/data.pdf .
- The U.S. added a robust 303,000 new jobs in March.
- The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf . Also, the EIA reported in the prior week:
- Field production of crude oil was unchanged at 13.1MM BPD.
- Natural gas storage fell 37BN cubic feet and was above the highest level during the past five years at this time of year.
- Baker Hughes reported the number of oil rigs fell 3 to 503 and the number of natural gas rigs was unchanged at 112.
Please call us if you have any questions.
Loren Rex – Emeritus
Erik A Smith, AIF® – President & C.E.O.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
https://ir.eia.gov/ngs/ngs.html
https://www.freddiemac.com/pmms
https://www.wsj.com/market-data?mod=nav_top_subsection
https://bakerhughesrigcount.gcs-web.com/na-rig-count
https://www.census.gov/economic-indicators
