Daily Market Notes | 5-minute read

May 23, 2024

By Donald Selkin | Chief Market Strategist

DOW: 39,401.23

S&P: 5,312.32

Nasdaq: 16,901.76

10YR T-Note: 4.50 %

Bitcoin: 68,029.10

VIX: 12.38

Gold: $2343.42

Crude Oil: $77.55

Prices Current as of 11:10 am

Source: CNBC

40+ Years on

Don Selkin, the creator and innovator of the "Fair Value" numbers, as its Chief Market Strategist on the Newbridge platform has given CNBC and its Predecessor, these numbers every day for the over 40 years - never missing a single day, as well as given the fair value for the Nasdaq 100 futures since their introduction in 1996 and the Dow Jones stock index futures since 1997. Mr. Selkin has also been quoted in several publications including but not limited to Bloomberg News, New York Post, Reuters, and The New York Times. Mr. Selkin's Fair Value numbers are included in the U.S.
Futures Report broadcast on CNBC every day before the market
opens attributing "Newbridge Securities" as the source. In addition, NSC provides to its professionals, their clients and the public access to Don Selkin's more in depth financial market views.

I had said at the Monday morning meeting that the two major events this week affecting the market would be the minutes from the last F.O.M.C. meeting yesterday at 2pm and then the release of the NVDA earnings after the close.

Well, the first one came true in the sense that the major indices were just about unchanged for the session until they started to weaken just before the 2pm minutes release and sure enough things accelerated to the downside after that event.

As a result, the Dow went from a 131 point decline at that time to a closing loss of 202 down to 39,676 led by selling in AMGN, GS, HD and CAT. The S&P was lower by 12 at the time and ended 14 points lower to 5307 as most of the large technology leaders sold off. The Nasdaq was off by 44 but it managed to improve from those levels to a 31 point decline to 16,501 as NVDA battled its way back to just about unchanged before its big event. The Russell 2000 Index of small stocks dropped again with a 16 point decline to 2081 as small banks were weak again while the VIX rose to 12.29 which is sort of in the middle of its lower recent support range.

As mentioned, indexes had been close to flat early in the day, but they slunk lower after the Federal Reserve released the minutes of its last policy meeting. Discouragingly for markets, the minutes showed that Fed officials suggested it “would likely take longer than previously thought” to get inflation fully under control following disappointingly high readings at the start of the year.

And even though Fed Chair Jerome Powell said after that meeting that the Federal Reserve is more likely to cut rates than to hike them, the minutes said “various participants” were willing to raise rates if inflation worsens. That cut at the rekindled hopes that the Fed will be able to cut it main interest rate at least once this year.

One of the market’s worst losses came from TGT, which tumbled 8% after the retailer reported profit for the latest quarter that fell short of analysts’ expectations. It also gave forecasted ranges for upcoming profit where the midpoints fell below analysts’ estimates, as it said customers are holding back and as a result it is cutting prices on thousands of everyday basics to entice customers struggling with still-high inflation.

LULU sank more after it said its chief product officer is leaving the company this month to “pursue another opportunity.” The company announced a new organizational structure where it won’t replace the role of chief product officer. This one has been a real disaster lately, having collapsed from 500 in late March to around 300 at present.

TJX, the off-price retailer, rose 3.5% after topping profit expectations. The company behind TJ Maxx and Marshalls also raised its forecast for earnings per share over the full year, saying its prices are helping to attract customers. In the bond market, the yield on the 10-year Treasury rose to 4.42% from 4.41% late Tuesday. The two-year yield, which moves more closely with expectations for the Fed, rose a bit more. It climbed to 4.87% from 4.84%.

Helping to keep the move in yields in check was the fact that the harsh talk in the minutes from the Fed’s latest meeting was from May 1st which was before some reports showed softening in inflation and certain parts of the U.S economy, which may have changed the minds of some Fed officials.

In recent speeches since that May 1 meeting, some Fed officials have indeed called those recent reports encouraging. But they have also said they still need to see months more of improving data before they could cut the federal funds rate, which is sitting at its highest level in more than 20 years.

The Fed is trying to pull off a tightrope walk where it slows the economy just enough through high interest rates to get inflation under control but not so much that it causes a bad recession.

High rates have made everything from credit-card bills to auto-loan payments more expensive. Mortgage rates are also high, and the sale of existing homes declined by 1.9% which was weaker than expected.

Central banks around the world seem eager to cut interest rates, but they may not go far given how well economies are doing and how high inflation still is.

In stock markets abroad, indexes were modestly lower across much of Europe and Asia. London’s FTSE 100 sank 0.5% after the U.K. Office for National Statistics announced a stronger-than-expected inflation reading that hurt hopes for a rate cut in June. Tokyo’s Nikkei 225 fell 0.8% after its trade deficit rose last month.

The first-quarter of 2024 earnings season is just about over, with retailers continuing to bring up the rear and the schedule for this week is as follows: yesterday – TJX, URBN, TOL, ADI higher and TGT lower; today – NVDA, SNOW higher and ELF, SNPS, BJ, RL lower; tonight – INTU, WDAY.

Economic reports will have: today – April existing home sales fell by 1.9%, release of minutes from last Fed meeting at 2pm (see above); today – weekly jobless claims were down a little to 215K, April new home sales were the lowest since November at 634K; Friday – April durable goods orders, final May U. of Michigan Consumer Sentiment Index.

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