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Alvaro Pereyra - CEO of Northbound

WEEKLY | STOCK MARKET DEPENDENT DATA

WEEKLY | STOCK MARKET DEPENDENT DATA

WEEKLY | STOCK MARKET DEPENDENT DATA

Once again, the main U.S. stock indexes continued to rise, stealthily approaching their historical highs, led by expectations that inflation, by an act of magic, will reverse the sideways trend it has been registering and that between tomorrow and Wednesday, the inflation data for the previous month will continue to fall, with no indication of this for the time being. It was in this environment that the Dow accumulated a year-to-date return of +4.8%, the S&P 500 +9.5% and the Nasdaq +8.9%, all three indexes very close to their historical highs recorded in March. However, sovereign rates have not budged in recent weeks with the 1-year still at 5.17% while the 5- and 10-year rates continue to hover around 4.5%, with no fundamental change in the first half of May, portending that inflation data will not yet show the direction for the fixed income market to take a breather. Evidently, as some would argue, the stock market momentum is underpinned by solid sales and earnings growth of S&P 500 companies during the first quarter of the year, justifying the stock market performance. Additionally, it is estimated that the growth of both readings will accelerate in the remainder of the year from 4.1% and 5.4%, respectively, to 5% and 11%, stimulating a greater stock market dynamism, regardless of the macroeconomic scenario of the country.     

Still, this week we will not only have last month's inflation data, but also Federal Reserve (FED) Chairman Jerome Powell will be delivering two important speeches and we will have the release of quarterly results from retail sector companies who will be closing the quarterly results season this and next week. Tomorrow we will see the release of producer and core producer inflation data which are estimated at 2.2% (from 2.1%) and 2.5% (from 2.4%), respectively while on Wednesday we will have headline and core headline data estimated at 3.5% (unchanged) and 3.7% (from 3.8%), respectively. If either of these figures comes in above market expectations, expect the stock market to suffer an increase in volatility as Powell's words tomorrow Tuesday and next Sunday will seek to quell any nervousness that may arise. Also reporting this week will be Alibaba, Under Armour, Home Depot, JD, and Walmart along with technology companies Baidu, Cisco and Monday, among many others. We will see if Home Depot and Walmart will follow the dynamics exposed by Disney and McDonald's, arguing that inflation is already having a significant impact on people's behavior and consumption. However, we will be able to analyze that possible change in consumer behavior in detail with the release of retail sales estimated at 3.8% (up from 4%), a figure that will also be released on Wednesday.

Let's briefly return to the macroeconomic theme, as last Friday market players ignored two pieces of information that came out of the survey of expectations administered by the University of Michigan, as the 5-year expected inflation went up (to 3.1%) and economic expectations plummeted almost -10 points to 67.4 points (from 77.2 points, the average figure at which the reading had been hovering since the beginning of the year). This adjustment in just 15 days may have been impacted by the global geopolitical environment, however, the US economic and political environment, 6 months before the US presidential election, may have already begun to take a deep toll on what lies ahead. Something of which major business leaders have been arguing, such as Berkshire Hathaway's Warren Buffett and JP Morgan Chase's Jamie Dimon, that the landing of the US economy will not be as "soft" as the market has been implying. This is under the assumption that the Fed's hands are tied for now to be able to stimulate the economy if it is already slowing. However, stock market volatility, with the ViX at 12.6 points has not internalized any of these risks for now, with American Express, Bank of America, Citigroup, JP Morgan Chase and Goldman Sachs stocks all turning all-time highs as they have been floating the market in recent weeks despite the slight deterioration in their credit portfolios with higher interest rates. The market may have incorporated a scenario of stable economic growth, stable but still high inflationary pressures and a high interest rate scenario, thereby boosting bank revenues for the remainder of the year. However, the Michigan survey along with comments from some consumer companies and a marginal increase in the unemployment rate could be showing the first cracks in the previously prescribed scenario. Therefore, any macroeconomic figure, until the next June 12, when the FED will pronounce again, will generate more volatility in one direction or the other, generating a greater dependence on the data that will be known. 

On the geopolitical front, President Biden announced that he will be limiting missile deliveries to Israel to prevent the final attack on Rafah in the Gaza Strip, however, Israeli Prime Minister Benjamin Netanyahu announced that the attack to eliminate Hamas will be relentless regardless of the ambivalent stance adopted by the US government. The Financial Times reported that the Biden administration will announce tomorrow, Tuesday, that tariffs on Chinese electric cars will be subject to a 100% tariff (up from 25%), intensifying the trade war with China.    

In conclusion, in the coming weeks, the US stock market will be guided by the macroeconomic data that will be published on a daily basis, where the financial sector will show the highest degree of volatility as it has approached its historical highs in an environment of high interest rates.

THIS WEEK 

Monday (May 13)

Quarterly Reports

  • Tencent Music Entertainment Group

  • Legend Biotech Corporation

  • StoneCo Ltd.

  • Apartment Income REIT Corp.

  • PACS Group, Inc.

Economic Reports

  • Inflation expectations report

Tuesday (May 14)

Quarterly Reports

  • Home Depot, Inc. (The)

  • Alibaba Group Holding Limited

  • Sony Group Corporation

  • Sea Limited

  • MINISO Group Holding Limited

Economic Reports

  • Producer Price Index Monthly Change Report

  • Producer Price Index Annual Change Report

  • Speech by Fed Chairman Jerome Powell

Wednesday (May 15)

Quarterly Reports

  • Cisco Systems, Inc.

  • MakeMyTrip Limited

  • ZTO Express (Cayman) Inc.

  • Grab Holdings Limited

  • monday.com Ltd.

Economic Reports

  • Monthly Change in Inflation Report

  • Annual Change in Inflation Report

  • Monthly Change in Core Inflation Report

  • Report of annual change in core inflation

Thursday (May 16)

Quarterly Reports

  • Walmart Inc.

  • Applied Materials, Inc.

  • Deere & Company

  • Copart, Inc.

  • JD.com, Inc.

Economic Reports

  • Preliminary Building Permits Report

  • Import price report

  • Export price report

Friday (May 17)

Quarterly Reports

  • Alvotech

  • H World Group Limited

  • Brookfield Renewable Corporation

  • RBC Bearings Incorporated

  • RLX Technology Inc.

Now you have more information about your investments. See you next week with more news.

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