Summary
Today’s market report examines the uneven performance of US stock indices on April 5th, marginal declines in gold futures, and slight reductions in oil prices. US economic data, including employment and the ISM non-manufacturing PMI, signals a potential economic slowdown. The ongoing credit crisis is highlighted by the $42 billion short selling of Toronto-Dominion Bank (TD.US).
Today’s Market Overview
As of the close on April 5th, the three major US stock indices demonstrated mixed results. The Dow Jones Industrial Average increased by 0.24%, reaching 33,482.72 points, while the Nasdaq Composite Index declined by 1.07%, settling at 11,996.86 points. The S&P 500 Index experienced a 0.25% reduction, closing at 4,090.38 points.
Gold: COMEX gold futures for June delivery dipped by 0.13% to $2,035.60 per ounce.
Oil: WTI crude oil futures for May delivery recorded a 0.12% decrease, settling at $80.61 per barrel, while Brent crude oil futures for June delivery dropped by 0.06% to $84.99 per barrel.
Macroeconomic Overview
Employment Data: A Decelerating Labor Market
The US ADP employment data for March indicates fewer job additions than anticipated, indicating decelerating labor demand.
Comments: The latest data from the ADP Research Institute reveals that the US added 145,000 jobs in March, falling short of the expected 200,000. The previous month’s figure was revised upwards from 242,000 to 261,000. Employment growth was most prominent in the leisure and hospitality, trade and transportation, and construction sectors, while the manufacturing, financial, professional, and business services sectors experienced decreased employment.
In addition, layoffs initially concentrated in large tech companies now extend to other industries. Businesses may pause expansion plans if the recent banking industry turbulence results in tighter credit conditions, leading to potential recruitment impacts. Amid escalating wage pressures and borrowing costs, smaller businesses face difficulties in talent competition.
ADP data also highlights that wage growth for employees remaining in their current roles was 6.9% YoY in March, the lowest level in over a year. The median wage increase for job switchers fell to 14.2%, the lowest level since January 2022. The US economy may encounter a more pronounced slowdown than expected in the first half of the year.
ISM Non-Manufacturing PMI: A Pessimistic Outlook
The US ISM non-manufacturing PMI for March significantly underperforms market expectations.
Comments: The Institute for Supply Management (ISM) reports that the US non-manufacturing PMI for March registered at 51.2, substantially below the anticipated 54.6 and down from February’s 55.1. Moreover, the March ISM non-manufacturing index declined to a three-month low, with new orders expanding at a reduced pace, new export orders experiencing a record decline, and the prices index significantly decreasing. The latest data suggests that both businesses and consumers are becoming more cautious, leading to a pessimistic outlook for the US economy in the second quarter.
Market Sentiment
Data provider ORTEX calculates that hedge funds’ short positions in Toronto-Dominion Bank (TD.US) have reached $42 billion, making it the most heavily shorted bank stock globally.
Comments: The persistent credit crisis in the banking industry may have a more prolonged impact on market sentiment than initially anticipated, particularly as central banks worldwide maintain their rate-hiking and balance sheet reduction plans.
Gold Market
Gold futures prices trade within a narrow range, sustaining levels above $2,000 per ounce.
Comments: The most actively traded June gold futures contract on the New York Commodity Exchange declined by $2.60 or 0.1%, settling at $2,035.60 per ounce. The modest decrease in gold prices during the day can be attributed to the strengthening US dollar index. However, weaker-than-expected US economic data, indicating a potential slowdown or even recession, has limited the downside for gold prices. Gold prices are expected to fluctuate around $2,000 per ounce in the short term.
Crude Oil Market
The US Energy Information Administration states that US crude oil inventories declined more than anticipated last week due to robust exports and refinery demand. Gasoline and distillate fuel inventories also recorded significant decreases.
Comments: The current market misalignment between actual US oil demand and recession expectations increases uncertainty in oil price fundamentals. The upcoming release of March non-farm employment data will likely reinforce recession expectations, maintaining oil prices within a narrow range in the short term.
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