Market 03/05: Cash flow continues to rotate out of the tech sector

Macro indicators: February Services PMI cools - January Factory Orders decline

Services PMI slightly down in February

• S&P Global Services PMI drops to 52.3 in February (> forecast 51.3 but slightly down from previous 52.5)

• ISM Services PMI drops to 52.6 in February (< forecast 53.0 & previous 53.4).

Specifically:

• Labor demand decreases: ISM employment trending worse

  • FYI: Last week's Conference Board survey also shows consumers less optimistic about the labor market.

    

• Supplier Deliveries drops to 48.9, lowest since October

  • Delivery times improve + Inventories drop sharply.

• New Orders rises to 6-month high (56.1)

  → Production rises to 5-month high (57.2).

January Factory Orders much lower than expected

• January Factory Orders: -3.6% (< forecast -2.9%)

• Shipments: -0.8% (< previous 0.4%).

→ Impact from sharp drop in Boeing orders (down -58.9% in January).

Market news: Mag 7 drags market down for 2 consecutive days, Bitcoin hits new high

Mag 7 stocks all drop, dragging market after series of bad news

S&P 500 drops below 5,100, while Nasdaq 100 down nearly -2%.

• Mega-cap stocks drop sharply due to negative news from Mag-7 group (below)

Meta:

• Multiple Meta platforms (Facebook, Threads, Instagram) went down in several countries (such as the US, UK, China, Australia, Mexico, and Europe) for over 2 hours (10 a.m. ET 03/05).

• Meta stock fell at the market open. X traffic surged.

Apple:

• Apple stock continues to decline today as reported when iPhone sales in China decline -24% in just the first 6 weeks of 2024....

• … due to competition with Huawei: Huawei sales have increased +64% same period.

  

• Market share in China has dropped to 4th position (15.7%) of Apple's total sales, compared to 2nd position same period last year (19%).

AMD:

• Reports difficulties with US trade barriers for AI chips for the Chinese market.

Testla:

• Yesterday: Sales in China dropped sharply (-19% YoY).

• Today: Tesla factory in Germany halts production after suspected arson, unclear when production will resume.

  • This is Tesla's only electric vehicle factory in Europe.

Bitcoin officially hits new high today

Bitcoin hit a new high at 69,000 USD due to excitement over bitcoin ETFs and upcoming halving event (up +60% from the start of the year)

Inflows into spot bitcoin ETFs continue to rise: +562 million USD yesterday.

• Bitcoin quickly becomes the 8th largest asset in the world after market cap surpasses silver

Earnings report: Target

Target ER: Launching paid membership program for customers to boost revenue

• EPS: 2.98 USD (> expected 0.56 USD).

• Revenue: 31.47 billion USD (< expected 400 million USD).

  → Plans to launch paid membership program after 3 consecutive quarters of revenue decline.

  • Goal: 100 million members.

2024 forecast: Growth slows due to inflation + changes in consumer spending.

• EPS: 2.42 USD.

• Revenue: 31.83 billion USD.

Target stock rises more than 11% at the opening of the trading session.

Updates on important meetings in Japan and China

• Read more about 3 important meetings in March of the US, China, and Japan: here.

Shunto wage negotiations in Japan

• Decline in labor participation rate in Japan supports wage increase potential: Japanese language link.

• CPI (excluding food prices) in Tokyo rises 2.5% (as expected).

  → Continues to support corporate wage increase decisions and BOJ pivot potential

→ Pushes BoJ to raise interest rates.

Updates on decisions in China's 'Two Sessions' meeting:

• China's 2024 GDP growth target set at 5%=, bringing budget deficit to 3% of GDP (< last year's 3.8%).

• However, analysts forecast this growth level is hard to achieve due to higher base (high growth last year) and pressures real estate crisis + deflation + stock market + local government debt rising.

  • Hang Seng Index falls 2.5% despite growth forecast.

    

• Defense spending increases +7.2% this year, the largest in 5 years (~230.6 billion USD, second highest in the world after the US).

Some other news:

• Gold hits peak of 2,100 USD.