After another action-packed week in the market, we observe systematic risks are playing a bigger role in the change in valuation of various asset classes. From the past week, notable events include the FOMC meeting and the oil market rally.
Private employers in the United States added a significant number of jobs in June, surpassing expectations and indicating a robust job market. According to the private payroll supplier ADP, 497,000 new jobs were created last month, marking the largest monthly increase in over a year. The rise in hiring was primarily driven by consumer-facing service industries, with leisure and hospitality jobs contributing the most to the surge.
The US Securities and Exchange Commission (SEC) has launched lawsuits against two major cryptocurrency exchanges, Binance and Coinbase, alleging various forms of misconduct. Bitcoin, the leading cryptocurrency, experienced a 6% drop in value upon the announcement, reaching lows of $25,440. Coinbase’s share price plummeted by 12%, prompting professional investment fund ARK Invest to purchase 400,000 shares during the dip.
While the S&P 500 appears to owe its gains this year to the success of Apple and other tech giants, a closer look reveals that without the emergence of artificial intelligence (AI), the index would be in negative territory. A handful of tech stocks with ambitious AI aspirations have played a significant role in driving the S&P 500’s 8% increase. Data reveals that non-AI stocks in the S&P 500 were down approximately 1% from the beginning of the year until mid-May.
China’s economic data for April fell short of expectations, highlighting the country’s uneven path to recovery from the impact of stringent Covid-19 restrictions. Industrial production in April grew by 5.6% year-on-year, lower than the 10.9% predicted by economists surveyed by Reuters. Additionally, retail sales rose by 18.4%, failing to meet the expected surge of 21%. Fixed asset investment also fell short, increasing by 4.7% compared to the anticipated 5.5%.
Inflation in the United States has slowed to its lowest rate in two years, according to the Consumer Price Index (CPI). The CPI index, which measures the cost of a basket of goods rose 0.4% in April and 4.9% over the last 12 months but this was a deceleration from 5% in the previous month. Analysts had expected the figure to remain at 5%.
The US Federal Reserve has raised interest rates by 0.25 percentage points, marking its 10th consecutive increase since March 2022. However, it also indicated that it may pause further hikes to assess the impact of recent bank failures and monitor inflation.
On Last Thursday, strong quarterly results from tech giants Facebook parent Meta Platforms Inc, Alphabet Inc, and e-commerce giant Amazon.com Inc led a rally on Wall Street. The S&P 500 Communication Services Index saw its biggest one-day percentage gain since February 2022, rising by 5.5%.
Major US banks continue to report their earnings for the first quarter of 2023, with Bank of America and Bank of New York Mellon both reporting better-than-expected earnings results.
The US Bureau of Labor Statistics has released the consumer price index data for March which increased by 5% year-on-year, a significant deceleration compared to the 6% rate recorded in February. Core CPI, a measure of underlying price pressures that strips out volatile energy and food costs, rose by 5.6% year-on-year, indicating that price pressures for some goods and services are still elevated.