ICYMI – Market outlook for 24 April 2024
As we navigate through the final week of April, key economic indicators poised to test the resilience of the US dollar are on the horizon, with Q1 GDP figures and Core PCE data expected to shed light on the economic trajectory. While the US dollar has seen some volatility, spurred by recent weak PMI readings, the potential remains for a short-lived sell-off. Historically, similar patterns were observed in the early months of 2015, when the dollar initially weakened against a backdrop of disappointing economic data but regained strength as investor sentiments adjusted to the broader economic landscape.
The PMI data from S&P Global has indicated a slower start to the second quarter, marking a departure from the growth trends we have become accustomed to. This deceleration is mirrored in the experiences of the late 2000s recessionary period, where initial downturns in PMI were early indicators of broader economic headwinds. Currently, with new business inflows decreasing for the first time in six months and business output expectations at a five-month low, concerns are mounting about the sustainability of the recovery.
On the treasury front, shorter-dated yields have taken a dip following the PMI report. Yet they remain high, indicating a market that is cautiously optimistic about the future of interest rates. The upcoming auction of $183 billion in new US Treasuries this week is reminiscent of similar large-scale auctions in 2011, where poor results led to a temporary spike in yields but eventually stabilized as market conditions normalized.
The technical analysis of the US 2-year yield suggests a bullish flag formation, potentially signaling a re-test of the 5.26% high reached last October.
Turning our focus to the stock market, Tesla has recently made headlines with its pre-market surge following the announcement to accelerate the introduction of more affordable electric vehicles (EVs).
This move by Tesla contrasts with its earlier hints at abandoning cheaper models and aligns with the strategic shifts often seen in the late 1990s by tech firms, which pivoted quickly in response to market demands and investor expectations. Despite missing revenue and earnings targets, with first-quarter revenue down 9% year-over-year, Tesla’s announcement has buoyed investor sentiment.
The market will closely watch developments as we approach key dates like Tesla’s detailed discussion on its cheaper EV models and robotaxi service scheduled for August 8,
