Market 05/24: Continued positive signals from the US economy

Fed officials' statements:

Fed Bostic:

• Needs more time for inflation to cool down.

• Will not raise rates again after cutting.

• Fed may cut rates by year-end, likely after Q4.

Fed Waller:

• Needs clearer data to start cutting.

• Holding rates steady for another 3-4 months won't harm the economy.

• Should not raise rates after cutting, to avoid uncertainty.

Durable goods orders recover despite high rates

• April durable goods orders increase: +0.7% MoM (est: -0.8% & prior: +0.8%) — however, the previous month's figure was revised down again.

• Ex-transport orders increase +0.4% MoM (est: +0.1% & prior: 0%).

→ Companies continue to ramp up long-term investment despite high rates.

• According to non-seasonally adjusted (NSA) data, durable goods orders fell sharply in April.

• However, the figure rose slightly when seasonally adjusted (SA).

• March data revised down again - 9th time in last 14 months.

• Increase mainly from defense spending, up +15.2% MoM.

• Non-defense spending down -1.5% MoM.

• Non-aircraft capital goods orders recover to +0.3% MoM (est: +0.1%, prior: -0.1%).

  • Boeing reports only 7 orders in April, down from 113 in March.

UMich May consumer sentiment revised higher than initial estimate - Inflation expectations cool

• UMich consumer sentiment index improves vs. estimates, at 69.1 but still lower than prior month (77.2).

→ Number of consumers affected by inflation remains relatively large.

Inflation expectations have fallen though high inflation still pressures consumer sentiment:

• 1-year inflation expectations: down to 3.3% (prior est: 3.5%).

• 5-10 year inflation expectations: down to 3% (prior est: 3.1%).

Crypto market: Ether ETF approved

1. SEC officially approves Spot Ether ETF.

   • Ether ETF trading expected to start in 2 weeks or next month, with inflows ~15 - 45 billion USD in the first 12 months.

• According to Standard Chartered, other ETFs like SOL and XRP may be approved in 2025.

Company earnings reports: Intuit, Workday

Intuit ER: Number of free TurboTax users down 1 million

• Revenue: up +12% YoY, reaching 6.737 billion USD.

  • 1 million customers using free TurboTax service canceled, raising concerns about software demand.

• Operating income: up +12% YoY, reaching 3.105 billion USD.

• GAAP EPS: 8.42 USD, up +14% YoY.

• Non-GAAP EPS: 9.88 USD, up +11% YoY.

Workday ER: Revenue beats expectations

• Revenue: 1.99 billion USD (estimate 1.97 billion USD)

  • … thanks to diverse product service portfolio, including education, finance, healthcare,…

• Revenue from Professional services: 175 million USD (previous quarter 156 million USD).

• EPS: 1.74 USD (estimate 1.59 USD)

FY 2025 revenue guidance: 7.7 - 7.725 billion USD (down from previous 7.725 - 7.775 billion USD).

Some other news: China continues to stockpile cobalt

1. Atlanta Fed Q2 US GDP estimate down to 3.5% (vs 3.6% previously).

2. NVIDIA cuts AI chip prices in China to compete with Huawei.

3. Alibaba authorizes 5 billion USD stock buyback (buyback) to improve and develop AI.

4. Eli Lilly invests additional 5.3 billion USD in factory producing weight loss and diabetes drugs to meet current shortages.

5. China plans largest-ever cobalt stockpiling, up to over 15,000 tons, raising concerns in the West.

   • Read more about China's raw materials reserves statistics: here.

6. Japan's inflation slows: CPI index (excluding fresh food) increases 2.2% YoY in April, hindering BoJ from easing policy.

   

• BoJ Governor maintains view that the economy will recover, stating interest rates could rise in the coming months.

Market Recap 05/23: Markets in Red - Economic Data Confirms FED's Fears

Employment and economic data confirm the view in yesterday's FOMC Meeting Minutes, pushing bond yields sharply higher from the start of today's trading session. The entire market sell-off pushes SPX through 5300 ahead of the extended holiday week.