Daily Comments

Traders are growing more confident that the U.S. can avoid a default on its debt. Asian markets were modestly higher. The Nikkei 225 rose +0.37% and the Shanghai Composite was up +0.35%. European markets were bullish. The DAX Index surged +1.20%. 10-year bunds yield 2.543%. April Durable Goods Orders were up +1.1% (ex-transportation down -0.2%) vs. -1.1% exp. Personal Income rose +0.4%, Personal Consumption Expenditures climbed +0.8%, double consensus expectations! The PCE Price Index moved up +0.4% vs. +0.4% expected. In advance data for April, the International Trade in Goods deficit widened to $-96.8B, Retail inventories were up +0.2%, and Wholesale Inventories were down -0.2%. Final May Consumer Sentiment printed at 59.2 vs. 58.0 expected. 10-Year Notes yield 3.806%. The June US$ index faded -0.03% to 104.140. July Crude Oil added +1.2% to $72.67. Aug Gold ended +0.17% higher at $1,965.90. Optimism re a deal on the debt ceiling sent stock index futures higher overnight and buyers continued to drive prices upwards during the day. A midday pause in the rally was met with more buy orders pressing prices to end near daily highs.

Despite the Nvidia led tech rally after hours in the U.S, Asian markets were mostly lower. The Nikkei 225 bounced back +0.39% but the Shanghai Composite edged down -0.11%. Germany is officially in recession after two quarters of negative GDP. The DAX is near an ATH but fell -0.31% today. 10-year bunds yield 2.524%. Initial Claims for 05/20 were 229K (below expectations of 248K and last week’s revised down -17K. In the first revision, Q1 GDP was revised higher to +1.3% (vs. +1.1% exp.), and Personal Consumption Expenditures were up to an annual rate of 3.8% vs. 3.7% exp. With mortgage rates at 7%, the April NAHB Pending Home Sales Index printed a weak 0.0% vs. consensus of 1.1%. 10-Year Notes yield 3.822%. The June US$ index climbed +0.37% to 104.185. July Crude Oil sank -3.4% to $71.83. June Gold lost -1.0% to $1,945.20. Pres. Biden said that debt ceiling negotiations are progressing. Fitch has placed the US’s AAA rating on negative watch. On the heels of record earnings guidance related to AI processors, NVDA soared +25%. The ES and NQ rallied in sympathy and closed stronger, but the YM and RTY ended negative.

In China, markets have given up most or all of their gains for the year. Asian markets were lower. The Nikkei 225 fell a further -0.89% and the Shanghai Composite sank -1.28%. UK CPI hit +8.7%, its highest in 31 years, with June rate hike expectations spiking. Stagflation? European markets went red. The DAX Index sank -1.92%. 10-year bunds yield 2.472%. For the week of 05/20, on higher rates, the MBA Mtge Apps Index fell -4.6%, and EIA Crude Inventories sank -12.5M bbls. FOMC Minutes from 05/03 noted several Fed officials suggested more hikes, yet uncertainty remains. BoA reported their small business clients have spent -8.0% less YoY. 10-Year Notes yield 3.737%. The June US$ index rallied +0.41% to 103.805. On a large supply drawdown, July Crude Oil jumped +2.0% to $74.34. June Gold sold off -0.5% to $1,964.60. After-hours, stocks continued yesterday’s bearish downdraft, falling further on the open. Treas. Sec. Yellen said the Treasury is “almost certain” to run out of resources in early June. There remain “significant gaps” between debt ceiling negotiators. Meta and MSFT are laying off more workers. Stock bears were in control all day, with major indices all ending solidly lower.