Market 05/30: Q1 GDP revised down - Consumer market begins to crack

Q1 GDP revised down to lowest level in 2 years due to slowing consumption

1. Q1 GDP revised down to lowest in 2 years

Q1/2024 GDP revised down from +1.6% Q/Q to +1.3% Q/Q - in line with economists' expectations

2. Consumer spending revised down the most, while government spending revised up

Net exports and private inventories lower but personal consumption and fixed asset investment still solid.

However, consumption had the largest downward revision among GDP components:

• Q1 Personal consumption revised down from +2.5% Q/Q to +2% (below expectations of +2.2% Q/Q)

• Core price index (GDP Core Price) in Q1/2024 also revised down from +3.7% Q/Q to +3.6% Q/Q

3. Corporate profits dip slightly from peak but profit margins rebound:

• US corporate profits dip slightly but remain solid

• Corporate profit margins rise to 15.2% in Q1 this year

Initial jobless claims for last week rise more than expected

• Initial jobless claims for last week at 219,000, higher than estimates of 217,000 and prior 216,000

• Continuing claims at 1.791 million, lower than estimates of 1.796 million and prior 1.787 million

• Weekly data often volatile and does not reflect the trend!

WARN layoff notices continue to surge

Pending home sales drop to record low in April as rates stay high

Pending home sales down -7.7% M/M - largest drop since February 2021, equivalent to -0.7% Y/Y

• South sees worst monthly decline since Jan 2022

• Midwest sees worst monthly decline since Apr 2020

This M/M decline has pushed pending home sales back to record low

All due to affordability plummeting as mortgage rates rise back above 7.00%.

Crude production near record high

Crude inventory report update:

1. API

• Crude -6.49M barrels (exp -1.9M barrels)

• Cushing -1.71M barrels

• Gasoline -452,000 barrels

• Distillates +2.05M barrels

2. DOE

• Crude -4.16M barrels (exp -1.9M barrels)

• Cushing -1.76M barrels

• Gasoline +2.02M barrels

• Distillates +2.54M barrels

Government added 485,000 barrels to SPR, while drawing down gasoline stocks

US crude production unchanged, pinned near record high

Crypto Market: DBS holds $650M ETH

Singapore's largest bank - DBS, with assets worth $739M, currently holds 173,700 ETH worth $650M

Fidelity's Ethereum Spot ETF, ticker FETH, listed on DTCC website

Babylon, Bitcoin staking solution incubated since 2022, successfully raises additional $70M in latest round led by Paradigm.

Earnings update: Salesforce, UiPath, Kohl’s

1. Salesforce

• Revenue +11% Y/Y to $9.1B (below exp $20M)

• Operating margin 19% (+14pp Y/Y).

• Non-GAAP EPS $2.44 (above exp $0.07)

• FY2025 guidance:

  • Revenue +9% Y/Y to $38B

  • Operating margin 20%

2. UiPath

• Revenue: 335 million USD, +16% Y/Y

  • License: 140 million USD

  • Subscription: 185 million USD

• Annual Recurring Revenue (ARR): 1.508 billion USD, +21% Y/Y

• Gross margin: 83%

• Diluted EPS (GAAP): -0.05 USD, slight improvement from -0.06 USD last year

3. Kohl’s

• Revenue: 3.382 billion USD, -5.3% Y/Y

• Gross margin: 39.5%, +48 bps

• Operating income: 43 million USD, down from 98 million USD in the same period last year

• Net loss: 27 million USD, EPS -0.24 USD

Other news

1. CalPERS, the nation's largest public pension fund, is voting against a 56 billion USD compensation package for Elon Musk

2. China may impose the largest fine in history on PwC (~ at least 138 million USD) for failing to detect the largest financial fraud in history at Evergrande

3. Japan's 10-year JGB yield hits 1.1% in the session - the highest since July 2011 as investors expect more tightening from the BOJ

4. WeWork may successfully negotiate to convert investor debt into equity, avoiding bankruptcy.

5. Aluminum price hits 2-year high as China cuts capacity

• But shortly after, aluminum and copper prices both fell as investors took profits en masse