U.S. equities climbed on Thursday, buoyed by a positive outlook from several retailers.
The S&P500 gained +1.99% in broad-based buying with 89.5% of stocks trading higher boosted by technology +2.45%, consumer discretionary +4.78% and financials +2.25% while real estate -0.10% was the only sector lower. The Dow Jones also gained +1.61%, as did the Nasdaq Composite +2.68% and Russell 2000 +2.17% while the VIX retreated -3.17% to 27.47. Consumer shares led gains as giant Macy’s Inc. lifted its profit forecast amid demand for high-end goods, while discount stores Dollar Tree and Dollar General raised their sales projections. Macy’s shares climbed +18.84%, as did DLTR +21.38% and DG +13.27%. Elsewhere, a report by the Federal Reserve Bank of New York showed U.S. consumers largely expect the inflation shock to be temporary, and price gains to be low and stable in the long run.
In economic data, the second estimate of U.S. GDP for Q1 was revised lower to an annualised pace of -1.5% from -1.4%, missing estimates of -1.3% although a bright spot was personal consumption which increased to +3.1% from +2.7% previously, surpassing estimates of+2.8%. Elsewhere, initial jobless claims for the week ending May 21st were slightly lower than forecast at +210k versus estimates of +215k. Investors will be focused on PCE inflation, the Federal Reserves’ preferred measure, on Friday expected to show core prices rose +0.3% over the month of April with headline prices up +0.2% compared with +0.9% in March. The University of Michigan consumer sentiment survey for May is also due to be released, forecast to show sentiment deteriorated to 59.1 from 65.2 in April. Treasury yields were little changed across the curve, although the 2-year rate weakened -2 basis points to 2.472% and the U.S. dollar index was -0.29% lower at 101.76.
European equities were also higher, buoyed by the latest minutes from the Federal Reserve which showed a shifting narrative that may see rate hikes paused in the latter half of the year depending on how data develops. U.K. retailers gained after Boris Johnson’s government announced a 15 billion Pound package of support for households while also announcing a windfall tax on profits of oil and gas companies, while Chancellor of the Exchequer Rishi Sunak didn’t rule out a similar levy on power generators. The Euro Stoxx 600 gained +0.78%, as did the DAX +1.59%, CAC +1.78% and FTSE100 +0.56% with the U.K’s main index weighed by a stronger Pound which rose +0.27% to 1.26088.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open decisively stronger this morning with ASX200 futures up +68 points or +0.96% to 7,175. The index declined -0.69% on Thursday weighed by materials -1.0% and consumer staples +1.02% with all sectors but technology +1.02% negative for the session. Technology shares were buoyed after Appen climbed +299.2% following a takeover bid from Canada’s Telus worth $9.5 per share. However, shares in Appen entered a second trading halt in the afternoon before announcing Telus was revoking their indicative proposal with no reason given. Endeavour Group sank 6 per cent to $7.20 after saying it expects “inflation to increase wages, rent and cost of goods sold and in combination with rising interest rates, may reduce customer demand”. The Australian dollar is little changed overnight, up just +0.10% to 0.7098 while the 10-year government bond yields declined -3.7 basis points to 3.203% on Thursday ahead of retail sales data for April this morning forecast to slow to +0.9% from +1.6% in March.
Oil prices gained with both WTI and Brent crude +3.53% and +3.13% higher at US$114.23 and US$117.60 a barrel. Iron ore futures in Singapore declined -1.47% on Thursday although have reversed those losses to trade +1.69% higher at US$131.75 this morning. Gold was little changed at US$1,851.75 with silver edging +0.14% higher to US$22.02 and Bitcoin weakened -0.97% to US$29,474.
Economic data:
- Australian Retail Sales (MoM Apr) 11:30
- U.S. PCE Inflation (YoY Apr) 22:30
- U.S. Consumer Sentiment (MoM May) 00:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
