US Non-Farm Payrolls, NVIDIA's Surge and Crucial Inflation Updates ??

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*Figures correct as of March 11, 2024

US Non-Farm Payrolls???

Friday brought the latest update on US Non-Farm Payrolls- this is arguably the most highly anticipated piece of monthly economic data in the calendar, as it gives vital information on the strength or otherwise of the world’s largest economy.

Analysts expected Non-Farm Payrolls to moderate from January’s blowout gains of 353,000 jobs to around 200,000 for February. The headline number showed an increase of 275,000 jobs- quite a lot above expectations. However, the prior month’s number was revised down sharply from 353,000 to 229,000.

Investors were also keeping a close eye on Average Hourly Earnings in the hope of seeing some moderation in wage growth following last month’s jump. Average Hourly Earnings fell to +0.1% month-on-month, below both the +0.2% expected and well below the previous increase of 0.6%. Finally, the Unemployment Rate rose to 3.9% from 3.7% previously. Overall, this was a good set of numbers. It shows that the labour market is loosening up a touch, while wage increases are manageable, and unlikely to add to inflationary pressures. The data raises the probability that the Federal Reserve will cut rates by 25 basis points in June.

Check out the US 500.

NVIDIA soars???

US stock indices rallied on Friday continuing their pick-up after a negative start to the week: the gains took the S&P 500 to another record high. Once again, NVIDIA was the star performer- having jumped nearly 7% on Thursday, it added another 3% in early trade on Friday. Investors continue to close their eyes and pay up in a seemingly desperate attempt to get a slice of generative AI action, while squashing their collective FOMO.

The size and speed of this latest leg of NVIDIA’s rally is quite stunning. The chip designer’s stock is up 93% since the start of this year! In contrast, Tesla, the old market darling, is down 28% over the same period. In fact, it’s been a mixed few months for other ‘Magnificent Seven’ stocks.

• Meta Platforms has tacked on an impressive 45%.
• Amazon and Microsoft are up 16.7% and 8.6% respectively.
• Apple has lost close to 12% so far this year.
• Alphabet (another company with exposure to generative AI) is down 4%.

What to make of it all? Well, it looks as if some differentiation is finally coming back into the market, but one could argue that that there’s now too much concentration of risk in NVIDIA. The chart is looking very etiolated, and we’ve got a long wait until there’s another quarterly earnings update which could provide further evidence to back up or boost its current valuation.

Check out NVIDIA.

The outlook for rate cuts???

Last week, Federal Reserve Chair Jerome Powell delivered two sets of testimonies before politicians in Washington. What everyone wanted to know is what the US central bank is planning to do with interest rates.

This is of particular importance now, not just because investors are speculating over the timing of the first rate cut since March 2020, or that rates are currently at their highest levels since the beginning of the century, but also because it's Presidential Election year. If there’s one thing we know about having Donald Trump as a candidate, it’s that he is perfectly happy to criticise the Federal Reserve and its Chair. In his second day of testimony in Washington on Thursday, Fed Chair Jerome Powell said that the US central bank was getting closer to cutting rates. While he didn’t give any additional clues over the timing of the first cut, as far as the CME’s FedWatch Tool is concerned, the probability of a 25-basis point rate cut in June has risen a few percentage points.??

Check out the EURUSD.

Looking ahead???

Crucial inflation updates???

The US Federal Reserve has said for a long time that it will be ‘data dependent’ when it comes to deciding when to start cutting interest rates. In other words, it will pay close attention to economic data as and when, it is released.

Now, there’s plenty to consider where inflation is concerned:

• Unemployment is a major part, as a tight labour market, as which currently exists, presents challenges when trying to bring down inflation as it often leads to inflation-busting wage demands.
• Consumer sentiment and inflation expectations are of interest, as is data on manufacturing, services, housing and commercial real estate, but it’s the inflation measures themselves which are key.

The Federal Reserve’s dual mandate incorporates a 2% inflation target to maintain price stability. Acting to achieve ‘full employment’ is the other half of the mandate. Now, that 2% target is based on Core PCE (Personal Consumption Expenditures) and at the end of last month we had the good news that it has fallen to +2.8% - not too far from target.

However, there are other important measures of inflation, including the CPI (Consumer Price Index) and PPI (Producer Price Index). Updates for these are released on Tuesday and Thursday respectively. These numbers ticked higher last month, suggesting that the Fed may delay its first rate cut to the autumn, or even hike again, but hopefully the rise in year-on-year CPI and PPI were anomalies, and perhaps the data will resume its downward route this month. There’s certainly a lot resting on this week’s releases- keep an eye on the dollar to gauge the market’s reaction.?

Check out the Dollar Index.

Gold makes fresh record ??

At the end of last week, gold was enjoying its eighth successive session of back-to-back gains. This rally, which began on Wednesday 28th February, has seen gold rise by 6.6% to post a fresh record high. It’s quite refreshing to see this upsurge in interest from investors who have spent many years snubbing precious metals in favour of US equities, technology in particular.

The latest rally comes as many cryptos are also soaring- just this week Bitcoin took out its own record high from 2021. There’s plenty of money sloshing around in the system, and it must go somewhere. The prospect of lower interest rates in the US and elsewhere is helping to lift all asset prices. There’s also been steady and decent demand for bullion from central banks, while gold has also found support from the falling dollar as it pulls back from recent highs. Chart-wise, the gold price looks somewhat extended at current levels, but as with NVIDIA, there hasn’t been a catalyst to trigger a pullback, yet.?

Check out gold.

The economic calendar????

?? On Monday, the clocks go forward across North America, but we must wait until the end of this month for the UK and Europe to catch up, and then it takes another week for Australia to fall into line. So, markets will be out of synch for the next four weeks.

?? On Tuesday, we have an update on UK unemployment, followed by the release of US inflation data in the form of the Consumer Price Index (CPI). This is an extremely important update, as CPI took an unwanted turn higher last month.

If it ticks up again, then investors may worry that the US Federal Reserve will further delay the timing of its first rate cut beyond June. Also, please bear in mind that all US data is released an hour early when compared to UK, Europe and Australia.

?? Wednesday morning brings an update on UK GDP, and later that day we have US crude oil inventories.

?? On Thursday we have another important US inflation update, and this time it’s the Producer Prices Index (PPI) which measure Wholesale inflation. That also ticked higher last month, so many will be hoping that it drops back to continue its downward trend.

Thursday also sees the release of US Retail Sales and weekly Unemployment Claims.

?? Friday sees the release of a bunch of second order data from the UK and Eurozone. But later, there is Industrial Production and the Empire State Manufacturing Index from the US. Then later, we have Consumer Sentiment and Inflation Expectations.??

This week’s key Q4 earnings???

?? Monday:??

Legend Biotech, Casey’s General Stores, Vail Resorts, Asana.?

?? Tuesday:?

KE holdings, Kanzhun, Uranium Energy, Guess?.?

?? Wednesday:?

Eni, Lennar, Dollar Tree, UiPath, Petco.?

?? Thursday:?

Adobe, BATs, Dollar General, Ulta Beauty, Wheaton Precious Metals, DICK’s Sporting Goods, Futu Holdings.?

?? Friday:?

Jabil, Williams-Sonoma, Five Below, Groupon.

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