Your Weekly Update for Monday, April 8, 2024.
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Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
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CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
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Summary
Markets were down last week. The Dow Jones Industrial Average FELL 2.22% to 38,904.04 while the S&P500 ended DOWN 0.98% to 5,204.34. The Nasdaq Composite FELL 0.72% to 16,248.50. The annual yield on the 30-year Treasury ROSE 18.4 basis point(s) to 4.532%.
Economic data for the week included ISM manufacturing improving into expansion, while ISM services/non-manufacturing slowed a bit, but remained in expansion as well. Nonfarm payrolls came in stronger than expected again, while job openings data has steadily flattened.
Equities fell back in the U.S. and most of the developed world, while emerging markets saw small gains. Bonds generally fell back as yields rose. Commodities fared well across the board, with strong gains in both energy and metals.
Economic Notes
(+) The ISM manufacturing index for March rose 2.5 points to 50.3, exceeding the median forecast of a less dramatic decline to 48.3âand back into expansionary territory for the first time since Oct. 2022. Within the report, gains of several points were seen in new orders and production (back into expansion), and employment (lessening the contraction toward neutral). Prices paid rose several points to around 56. Of the 18 industry groups, half showed expansion, while six still contracted, with commentary pointing to some softness in demand although showing more optimism for the coming quarter. This points to a possible trough in manufacturing activity having been already reached, with perhaps a new cycle starting anew. Data in months to come will provide more color on the magnitude of this path, which could solidify the soft landing scenario.
(-/0) The ISM services/non-manufacturing index for March declined by -1.2 points to 51.4, below the expected small gain to 52.8. While two-thirds of industries reported expansion, data within the total report was mixed, with business activity ticking up further into expansion at over 57, as did employment, which remained just below neutral. On the other hand, new orders fell by nearly -2 points, but stayed in the mid-50s. Prices paid fell by -5 points but also stayed in expansion. Interestingly, manufacturing data has improved, now into expansion, while services have fallen closer to neutral. On a forward-looking basis, the length of the economic expansion could hinge on these two respective paths.
(-) Construction spending fell -0.3% in February, similar to the pace of the prior month, but below the expected increase of 0.7%. Private residential spending gained 0.7%, offset by declines of around a percent for private non-residential, as well as public spending of both types. As construction costs fell back by several tenths, real spending was little changed.
(0) Initial jobless claims for the Mar. 30 ending week rose by 9k to 221k, above the 214k median forecast. On the other hand, continuing claims for the Mar. 23 week fell by -19k to 1.791 mil., below the expected level of 1.811 mil. Claims were mixed by state, with the largest states accounting for the largest movements, as expected, pointing to little overall statistical change.
(0) The government JOLTSÂ job openings report for February showed a rise of 8k to 8.756 mil., just above the expected decline to 8.730 mil. By segment, gains were largest in financial (117k), government (55k), and leisure/hospitality (23k), while declines were greatest in information (-85k), trade/transports/hospitality (-65k), and private education/health services (-38k). The job openings rate was unchanged at 5.3%, while the hiring rate ticked up a tenth to 3.7%. On the departure side, the layoff rate ticked up a tenth to 1.1%, while the quits rate was unchanged at 2.2%. Based on relationships to nonfarm payrolls and other data, current JOLTS numbers have tempered from pandemic extremes, continuing a trend of decline but still pointing to an environment of full employment generally.
(+) The employment situation report for March came in stronger than expected, which continued to put a focus on how the Federal Reserve will position their message in an environment where labor continues to plug along at a decently robust rate. Overall, job growth was positive in 60% of private industries, in keeping with trends over the past six months. Nonfarm payrolls rose by 303k in March, exceeding Februaryâs decent 270k reading, as well as beating expectations calling for 212k. February gains were revised down by -5k, while gains in January were revised up by 27k. Job gains were strongest in health care (72k, services and hospitals), government (71k, mostly in local), leisure/hospitality (49k, finally returning to its pre-pandemic level), and construction (39k, mostly in specialty trade). Retail jobs were statistically little changed (up 18k, most of which being general merchandise retailers), which was also the case in most other major segments. Temporary employment, seen as a signal of marginal hiring need, continued to decline slightly, but at a more tempered rate than the prior month.
The unemployment rate declined by a tenth to 3.8%, despite expectations for no change, with a 498k gain in household employment. The U-6 underemployment rate was unchanged at 7.3%. The labor force participation rate moved up two-tenths to 62.7%, further than expectations, with contributions from immigration. Average hourly earnings rose by 0.3%, meeting expectations but a tenth faster than the prior month. Year-over-year, earnings remain up 4.1%, which is a few tenths slower than the prior monthâs pace, which is seen as positive decelerating force from an inflation standpoint. Average manufacturing hours rose a tenth to 34.4.
Market Notes
| Period ending 4/5/2024 | 1 Week % | YTD % |
| DJIA | -2.23 | 3.77 |
| S&P 500 | -0.93 | 9.53 |
| NASDAQ | -0.79 | 8.45 |
| Russell 2000 | -2.86 | 2.17 |
| MSCI-EAFE | -1.35 | 4.36 |
| MSCI-EM | 0.28 | 2.65 |
| Bloomberg U.S. Aggregate | -1.06 | -1.83 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2023 | 5.40 | 4.23 | 3.84 | 3.88 | 4.03 |
| 3/29/2024 | 5.46 | 4.59 | 4.21 | 4.20 | 4.34 |
| 4/5/2024 | 5.43 | 4.73 | 4.38 | 4.39 | 4.54 |
U.S. stocks fell back last week, seeing more volatility than in the recent few months. By sector, energy stocks rose 4%, followed by communications up over a percent. The majority of other sectors lost ground, oddly led by normally defensive health care and consumer staples, down up to -3% each, with the former reacting to Medicare rates unchanged from the initial estimate. Real estate also fell -3%, hampered by higher long-term interest rates.
There was no shortage of catalysts for greater volatility, including an ISM manufacturing report improving, which pushed U.S. Treasury yields higher. Chair Powellâs recent remarks at a mid-week speech were a bit dovish, which elevated hopes that interest rate cuts wonât be too far down the pike. Then again, Minneapolis Fed President Kashkari opined that no cuts could be in order if inflation remains sticky. This rate uncertainty was joined by the release of a recent conversation between President Biden and Israelâs Prime Minister Netanyahu, alluding to a greater probability of strikes against Iranâwhich was felt immediately in oil markets. This was not taken well in equities, either, causing a market reversal of nearly -2%. This just reiterates the marketâs current sensitivity to anything that could take the market off-track from the current âsoft landingâ narrative. This included a growing concern that economic strength and sticky inflation numbers might keep interest rates indeed âhigher for longer.â The interest rate situation has continued to be perhaps the key driver of market sentiment so far this year, with one fear being that the current higher short-term rate (leading to higher cost of capital) will ultimately wear away at current corporate strength. It hasnât appeared to have happened yet, although âlagâ effects are well-known, and unpredictable. Earnings season for Q1 begins next week, which may take over investor interest for the time being.
Foreign stocks followed the U.S. lead, with declines in developed regionsâJapan seeing the greatest declines. Forces were similar to those driving U.S. stocks in terms of timing of rate cuts, the Middle East, as well as improving economic dataâwhich had been lagging to a greater degree in Europe. Emerging markets bucked the trend, with small gains in a variety of nations, including China, India, Brazil, and Mexico. In China, manufacturing PMI also ticked back above the expansionary 50 level, in addition to further expansion in services. Both of these boosted sentiment, as did hints that the Bank of China may provide additional stimulus measures to help achieve broader growth targets. In Turkey, unexpected wins from opposition party candidates in local elections boosted sentiment, resulting in market gains.
Bonds fell back last week along with rates ticking higher, particularly in the 2-year and longer segment of the yield curve. This appeared primarily due to the ISM manufacturing report improving, providing a general tailwind to U.S. economic growth. Due to the duration effects, U.S. Treasuries lagged by the greatest degree, while a credit spread buffer helped investment-grade, high yield, and floating rate bank loans to perform slightly better. Foreign bonds performed similarly on net, with little change in the value of the U.S. dollar during the week.
Commodities rose across the board last week, with sharp gains in energy, industrial metals and precious metals. Crude oil prices rose over 4% last week to $87/barrel, due to the Biden-Netanyahu conversation alluding to potential Middle East escalation, in addition to already-tight supplies, and an improving global demand picture. Strength in the gold market has continued, with the price continuing to rise this year to a record $2,300/oz. Gold is a unique commodity, as one of the assets with near-zero long-term correlations to most all other conventional assets and features unpredictable behavior. Recently, it has thrived from several ongoing geopolitical concerns (Ukraine, Gaza, Red Sea), global central bank restocking, Chinese retail buying, and likely even more so due to hopes for Fed rate cuts this year. Lower real rates improve the comparative of gold versus U.S. Treasury debt, as does the potential for falling rates to lower the value of the U.S. dollar (which has been especially strong for years).
Mortgage Rates
“Mortgage rates showed little movement again this week, hovering around 6.8 percent,â said Sam Khater, Freddie Macâs Chief Economist. âSince the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either. While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term. On the plus side, inventory is improving somewhat, which should help temper home price growth.â
The 30-year FRM averaged 6.82 percent as of April 4, 2024, up from last week when it averaged 6.79 percent. A year ago at this time, the 30-year FRM averaged 6.28 percent.
The 15-year FRM averaged 6.06 percent, down from last week when it averaged 6.11 percent. A year ago at this time, the 15-year FRM averaged 5.64 percent.
Freddie Macâs Primary Mortgage Market SurveyÂŽ is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. Â (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | 72217.01 | 4.07% | 3.49% | $1,421,054,605,652 | $33,287,391,883 |
| ETH | Ethereum | 3641.82 | 6.90% | 2.36% | $437,313,574,764 | $15,815,084,331 |
| BNB | BNB | 593.83 | -1.13% | -0.96% | $88,686,711,143 | $1,695,951,256 |
| SOL | Solana | 180.86 | 0.34% | 7.93% | $80,584,264,622 | $2,551,158,293 |
| XRP | XRP | 0.6069 | 1.73% | -0.89% | $33,413,401,815 | $1,573,774,160 |
| DOGE | Dogecoin | 0.2046 | 3.72% | -1.91% | $29,426,338,151 | $2,513,393,827 |
| ADA | Cardano | 0.6045 | 1.84% | -3.82% | $21,522,841,722 | $412,357,078 |
| TON | Toncoin | 5.86 | 8.58% | 9.29% | $20,340,412,333 | $240,292,448 |
| AVAX | Avalanche | 49.99 | 2.54% | -5.17% | $18,890,326,892 | $473,794,880 |
| SHIB | Shiba Inu | 0.00002881 | 1.62% | -0.52% | $16,977,301,820 | $752,865,868 |
| BCH | Bitcoin Cash | 694.72 | 1.74% | 4.69% | $13,678,220,762 | $828,285,069 |
| DOT | Polkadot | 8.96 | 3.28% | -3.37% | $12,820,147,530 | $236,889,834 |
| LINK | Chainlink | 18.47 | 3.65% | 0.00% | $10,842,226,920 | $337,147,511 |
| TRX | TRON | 0.1232 | 2.30% | 1.46% | $10,804,275,809 | $285,581,990 |
| MATIC | Polygon | 0.9336 | 2.66% | -3.30% | $9,244,442,014 | $308,965,186 |
| ICP | Internet Computer | 17.98 | 4.37% | -2.60% | $8,312,509,106 | $165,517,771 |
| NEAR | NEAR Protocol | 7.39 | 5.66% | 8.32% | $7,832,601,254 | $558,563,102 |
| LTC | Litecoin | 103.67 | 0.55% | -1.62% | $7,712,873,451 | $717,539,244 |
Information current as of 5:50 AM PDT, Monday, April 8, 2024. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management,
MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorâs, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.