"The Final Countdown!"

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Alright, let’s dig in!

Despite a lackluster Friday session, all three major indexes logged wins last week. U.S. stocks rose for the sixth time in seven weeks, shrugging off Friday's jump in yields following a stronger-than-anticipated jobs report. NVIDIA's (NVDA) announcement of a new chip and a 10-for-1 stock split, effective at Friday’s close, along with "Roaring Kitty" making his first public comments about GameStop (GME) in three years, were significant highlights.

NVIDIA's performance propelled the S&P 500 up 1.47% for the week, the Nasdaq up 2.29%, and the Dow with a modest gain of 0.44%. However, small caps lagged, with the Russell 2000 Index falling by 2.07%.

Sector Performance: 

NVIDIA's strength drove technology leadership, supplemented by positive earnings from Hewlett Packard Enterprise (HPE) and gains in Alphabet (GOOG) and Meta (META). Communication services, another tech-heavy sector, also performed well. Utilities, however, sold off due to a rate increase, with significant losses in Vistra (VST) and Constellation Energy (CEG).

Commodities: The dollar edged higher, while oil prices struggled despite an intraweek relief rally. West Texas Intermediate (WTI) slid 1.5%, while natural gas futures jumped over 12% on expectations of increased cooling demand. Industrial metals underperformed, with zinc and nickel dropping over 5%, and copper and gold also experiencing declines.

U.S. Economic Recap:

• Nonfarm Payrolls: May's nonfarm payrolls grew by 272,000, surprising investors and pushing yields higher. The unemployment rate rose slightly to 4%, with government employment increasing by 43,000. Average hourly earnings rose 4.1% year-over-year, adding upward pressure on yields.

• ISM Services Report: Mixed signals with stable growth in some sectors like restaurants and hotels, but rising costs of capital affecting construction firms. Prices paid by services organizations continue to rise, although at a slower pace.

• JOLTS Report: April's job openings and labour turnover report showed a stabilization in the job market, with the openings-to-unemployed ratio declining to 1.24, suggesting easing wage pressures.

Global Market Recap:

• European Central Bank (ECB): The ECB cut interest rates for the first time since 2019, citing progress in reducing inflationary pressures. Major European stock indexes recorded gains, with Germany’s DAX up 0.32% and STOXX Europe 600 Index up 1.04%.

• India and Mexico: India's election results showed a weaker mandate for Prime Minister Modi, while Mexico elected its first female leader, causing market jitters and a significant drop in Mexican stocks and the peso.

• Japan and China: Japan's stock markets had mixed returns, with the Nikkei 225 Index up 0.5%. In China, despite data showing a potential recovery in the property sector and better-than-expected export growth, stocks retreated.

Cryptocurrency Highlights:

• Bitcoin (BTC) Neared Record Highs Amid ETF Surge: Last week, Bitcoin's value approached record highs due to a surge in ETF investments. Bloomberg reported that net subscriptions for Bitcoin ETFs reached $15.6 billion since January, bringing total assets to $62.3 billion. Major players like BlackRock and Fidelity led these successful debuts, signaling a shift in the crypto industry's focus from Asia to the US.

• Mercuryo and Trust Wallet Partner for Crypto-to-Fiat Conversion: Mercuryo and Trust Wallet have teamed up to offer a new off-ramp service, enabling users to convert cryptocurrencies into fiat currencies. This service supports over 30 cryptocurrencies, converting them into USD or EUR, and is available in 135 countries. The partnership aims to bridge Web3 and Web2, making crypto more accessible to traditional users.

• Binance Coin (BNB) Hit New High: Binance Coin (BNB) surged past $700, reaching a new record high of $717. BNB's market cap now stands at nearly $100 billion, surpassing major companies like UBS, Dell, and Starbucks.

Here are other key highlights from last week:

• AMD is positioned for long-term growth.

• Robinhood to acquire Bitstamp crypto exchange in $200M all-cash deal.

• SushiSwap is now live on Bitcoin sidechain Rootstock.

• McDonald’s metaverse debuts in Singapore.

• Polygon Labs acquired Toposware, a leading ZK engineering startup.

This is set to be a blockbuster week!

Early this Week:

Monday, June 10:

• Apple WWDC 2024:

  • Apple Intelligence: Apple's first AI system, Apple Intelligence, will be integrated into iPhone, iPad, and Mac, enhancing Siri's capabilities with on-screen awareness and the ability to take actions on behalf of users.

  • Partnership with OpenAI: Apple announced a partnership with OpenAI to integrate ChatGPT directly into iOS 18, iPadOS 18, and macOS.

  • New Features: Highlights include using the iPad calculator as a notepad for real-time answers, Tap-to-Cash for quick payments between iPhones, and macOS 15's new mirroring capabilities with iPhones.

  • Personalized AI: Apple Intelligence will allow for personalized AI-generated images and context-aware email prioritization through the new Image Playground and Mail features.

• Amazon AWS re:Inforce Conference:

  • The event covered topics such as data protection, threat detection, incident response, network and infrastructure security, generative AI, governance, risk and compliance, and application security.

• NVIDIA Stock Split:

  • NVIDIA's 10-for-1 stock split took effect, potentially making the stock more accessible to a broader range of investors.

Tuesday, June 11:

• 10-Year Bond Auction Results:

  • The highest interest rate of bonds sold came in lower than the previous month.

  • The bid-to-cover ratio was higher than the previous auction, indicating strong demand.

• OPEC+ Monthly Oil Market Report:

  • OPEC+ left its 2024 world oil demand growth forecast unchanged at 2.25 million BPD and its 2025 forecast at 1.85 million BPD.

  • The group trimmed its estimate of Q1 2024 total oil demand by 50,000 BPD to 103.51 million BPD, but increased the Q2 2024 forecast by 50,000 BPD.

  • OPEC+ noted that the global services sector will be a key contributor to economic growth in the second half of 2024, supported by travel and tourism, positively impacting oil demand.

  • OPEC+ crude oil output in May rose by 29,000 BPD to 26.63 million BPD.

Upcoming U.S. Economic Data This Week

• Wednesday, June 12:

  • CPI Inflation Report

  • Federal Reserve Interest Rate Decision

  • Fed Dot-Plot (more details provided below)

  • Powell's Press Conference

• Thursday, June 13:

  • Initial Jobless Claims

  • PPI Inflation Report

  • 30-Year Bond Auction

  • Tesla Annual Meeting

    • Shareholders will vote on twelve proposals, including whether to approve Elon Musk's compensation package.

  • Fed Williams' Interview with Treasury Secretary Yellen

• Friday, June 14:

  • University of Michigan Consumer Sentiment

  • Fed Goolsbee's Fireside Chat at the Iowa Farm Bureau Economic Summit

Earnings Releases:

Notable earnings releases this week are outlined in the chart below.

Key Global Economic Events this week:

• Monday June 10

  • China New Loans

• Tuesday June 11

  • UK Claimant Count Change

  • UK Average Earnings Index

  • China CPI and PPI

• Wednesday June 12

  • UK GDP

  • Bank of Canada (BoC) Gov Macklem Speaks

  • Australia Unemployment Rate

• Thurs June 13

  • Bank of Japan Interest Rate Decision

• Friday June 14

  • European Central Bank (ECB) President Lagarde Speaks

Trading Tip: When in doubt, get out, and don’t get in when in doubt!

Week 6/02/24 - 6/08/24 Recap

Special Tools and Strategies

Understanding the Fed Dot Plot

This week, there's much anticipation about the Fed Interest Rate decision and significant talk about the Fed Dot Plot, which will be released on Wednesday, June 12.

What is the Fed Dot Plot?

The Fed Dot Plot is a chart that shows where each member of the Federal Open Market Committee (FOMC) thinks interest rates will be by the end of the current year, the next two years, and the "longer run." Each dot represents an individual member's view. This chart is part of the Fed's Summary of Economic Projections reports, published four times a year (March, June, September, and December).

Why is the Fed Dot Plot Important?

The dot plot is essential because it provides insight into the Fed's collective expectations for future interest rates, which influence rates for businesses, consumers, and investors. The federal funds rate is a tool the Fed uses to achieve its dual mandate: low unemployment and low inflation. Understanding the dot plot helps investors anticipate the Fed's policy moves and adjust their strategies accordingly.

How Do Analysts and Investors Read the Dot Plot?

Reading the Fed’s dot plot involves interpreting the chart's vertical and horizontal axes:

• Vertical Axis: Shows the target interest rate percentages.

• Horizontal Axis: Displays the current calendar year, the next two years, and the "longer run." Each column indicates expectations for the end of that year. The “longer run” column represents the FOMC members' projections for the "neutral" interest rate, which is expected to neither stimulate nor restrain the economy.

• Dots: Each dot represents a member’s projection for the target range at the end of the year.

Interpreting the Dot Plot

The dot plot tells you the Fed’s collective expectations on interest rates over time. Analysts and investors look for:

• Trends: The general direction policymakers expect interest rates to move.

• Clusters: Where most dots are grouped, indicating agreement among policymakers.

• Shifts: Changes from one quarter’s dot plot to the next, showing evolving expectations.

Why Does the Dot Plot Change?

The Fed's dot plot changes as policymakers adjust their projections based on new economic data. Key indicators influencing these projections include:

• Change in Real GDP: Measures economic growth after accounting for inflation.

• Unemployment Rate: Indicates the overall strength of the economy.

• PCE Inflation: Captures changes in household spending.

• Core PCE Inflation: Strips out volatile food and energy prices to show entrenched inflation.

How Can You Use the Dot Plot for Smarter Investments?

While the dot plot isn’t a crystal ball, it offers insights that can guide your investment decisions. Here are some tips:

• Assess the Fed's Economic View: Compare dot plots over time to see if the Fed is leaning hawkish (raising rates) or dovish (lowering rates). Hawkishness suggests concerns about inflation, while dovishness indicates worries about slowing growth.

• Consider Sector Sensitivity to Rates:

  • High-Rate Environment: Banks and lenders might profit from rising rates, while consumer discretionary, industrial, and materials stocks typically perform poorly.

  • Low-Rate Environment: Less sensitive sectors like healthcare might perform better.

What to Expect from the June 12 Dot Plot

As the Fed releases its updated dot plot on June 12, analysts and investors will closely watch for any shifts in projections, especially given the current economic climate. The dot plot will provide valuable clues about the Fed's future rate decisions, helping you navigate your investment strategy amid the evolving economic landscape.

Disclaimer: This newsletter is strictly educational. The information this report provides does not constitute investment, financial, trading, or any other advice. You should not treat any of the report’s content as such. Please be careful and do your research.