Weekly market recap

Your weekly global financial market newsletter

  • The Dow Jones Industrial Average, one of the oldest stock indices, closed above 40,000 points for the first time in history last week. It took the index 128 years to reach that mark, a truly remarkable time. But when we look at the individual milestones and how long it took to reach/exceed them, it gets even more interesting.
  • The index first reached 1,000 points on January 18th, 1966, but did not close above 1,000 points for the first time until almost 7 years later. The first time the index closed at 5,000 points was on November 21st, 1995. At 10 000 points, the index closed for the first time on 29th of March 1999, so it took almost 103 years to reach this level.
  • At 20,000 points, the index closed for the first time on January 25th, 2017, meaning it "made" the second 10,000 points in less than 18 years. It then closed above 30,000 points for the first time on November 24th, 2020, meaning it took nearly 4 years to reach the next 10,000 points. And it then took an even shorter time to make another 10,000 points when it closed above 40,000 points for the first time last Thursday. How long will it take to close above the magic 50,000 points for the first time?

Indices

Stocks in the US were affected by inflation data this week, which eventually helped the indices to reach new records. Investors are thus continuing to keep a close eye on the macro data as well as the Fed officials’ announcement of a possible change in monetary policy settings. The DJIA index thus closed above the 40,000-point mark for the first time in history and had its fifth profitable week, while the S&P 500 and Nasdaq had their fourth week in the green, the first time that has happened since February this year.

Investors in European markets are also reacting to the ECB’s rate hike plans, with statements from some policymakers over the past week rather cooling their optimism. The pan-European STOXX Europe 600 Index rose 0.42% and also reached its all-time high during the week, which it could not sustain by the end of the week. Germany’s DAX fell 0.36%, France’s CAC 40 declined 0.63% and in the UK, the FTSE 100 Index finished modestly lower (-0.16 %).

US30
+1.24%
US100
+2.12%
US500
+1.54%
GER30
-0.36%

Commodities

US natural gas has had its third straight week of growth, reaching its highest level since the beginning of January this year. Over the past month, the price of US natural gas has already added nearly 33% and while the commodity was trading below $2/MMBtu at the beginning of the month, it had already broken through the $2.65/MMBtu level by the end of last week. This is due to falling inventories, with the EIA reporting a smaller than expected increase in stocks. U.S. energy companies added 70 billion cubic feet (bcf) of gas to storage last week, below market expectations, which had anticipated a 76 bcf increase. US gas production was also curtailed in 2024 as several major producers including EQT and Chesapeake Energy delayed well completions and cut back on other drilling activities. Forecasts of warmer than normal temperatures for the current period will then lead to an increase in gas consumption by electricity generators due to increased demand from greater use of air conditioning.

The price of silver also saw a significant rise, breaking through the $30 per troy ounce level during the week, the highest since January 2013. Year-over-year, the silver price has already risen by more than 34%, and has added more than 25% since the beginning of this year. This is mainly due to the growth in industrial demand, and investment demand for physical silver. As we wrote recently, silver is now considered undervalued relative to gold, when as recently as January it took as much as 90 ounces of silver to buy one ounce of gold. However, analysts expect that if the US economy remains stable and the Fed cuts rates, this ratio could fall to as low as 70. Silver is a key commodity in the production of solar panels, and this industry accounts for up to around 20% of industrial silver demand.

Gold
+2.31%
Silver
+11.83%
BRENT
+1.41%
NATGAS
+17.14%

Forex

The US dollar lost quite significantly last week, ending in the red compared to most major currencies, and the dollar index reached its lowest level since the beginning of April this year. The dollar has been gaining over the last two days thanks to hawkish comments from St. Louis Fed President Loretta Mester and New York Fed President John Williams. However, during the week, speculation grew about a possible double rate cut by the US central bank due to softer than expected data regarding inflation and retail sales. As such, analysts will now focus on the April core PCE data in addition to other policymaker statements.

EUR/USD
+0.91%
USD/JPY
-0.09%
GBP/USD
+1.41%
USD/CAD
-0.44%

Macro

Wednesday’s U.S. consumer inflation data came in at or slightly below expectations, in contrast to the worse-than-expected data from the previous three months.  Consumer prices rose by 0.3% in April, just short of expectations (+0.4%), while core prices (excluding food and energy) rose by 0.3% as expected. Annual inflation rose by 3.4% as expected, as did the core figure, which showed prices rising by 3.6% as expected.

Thursday’s retail sales data showed that there was also slack. The Commerce Department reported that retail sales were flat in April, compared to consensus estimates of a 0.4% increase, while it revised down its estimate for March sales from +0.7% to +0.6%.

On Thursday, mostly mixed data came in, as initial jobless claims fell roughly in line with the forecasts from 232,000 to 222,000 (219,000 was expected). Housing starts and building permits disappointed, both posting worse-than-expected numbers.

The final CPI figures for Germany confirmed the preliminary reading for April, with prices rising 2.2% y/y and inflation rising slightly from 0.4% to 0.5% on a month-on-month basis. The ZEW economic sentiment index for May surprised positively in Germany and also in the Euro Area. The second estimate of GDP in the Euro Area for Q1 also did not come as a surprise, as the old continent’s economy grew by 0.3% in the first quarter and recorded growth of 0.4% on an annual basis.

What to watch out for this week

  • Speeches by several Fed officials will be among the main draws for US investors. These will include Atlanta Fed President Raphael Bostic, Governors Michael Barr, Christopher Waller and Philip Jefferson, Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin.
  • Along with them, investors will be expecting the minutes of the FOMC meeting from late April/May, where Fed Chair Jerome Powell indicated that rates are likely to remain higher for longer amid lingering inflation pressures. In both cases, investors will be interested in indications of when the Fed may move to cut interest rates as economic data points to some cooling in the economy, although price pressures persist and comments from several officials suggest higher rates for longer.
  • In addition, on the macro data front, preliminary numbers on the manufacturing and services manufacturing purchasing managers' index are expected to be released, with a slight increase. Also important will be data on durable goods orders, which are expected to rise for the third consecutive month, but at a slower pace. Investors will also be keeping a close eye on existing and new home sales, which are expected to decline.
  • In Germany and the Euro Area, we will also see preliminary PMI data, which may give investors a better picture of the economic outlook. After six straight quarters of stagnant or negative growth, there is a slow recovery in the eurozone, with the service sector expanding faster and manufacturing contracting less. In addition, we have yet to see the final data on Germany's first quarter GDP.
  • PMIs will come out in the UK, which will show continued growth in the service sector and less contraction in manufacturing. In addition, we are also due to see April inflation data, which is expected to fall to 2.1% y/y from 3.2% in March and move closer to the BoE's inflation target of 2%. Core inflation is expected to fall to 3.7%, the lowest since October 2021.
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Source: forexfactory.com
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