Economic Data and Market Highlights
Global equity markets slipped this past week by 38 basis points as indicated by the MSCI All Country World Index with most countries declining. Japan was down 1.00%, China, down 4.80%, UK, down 0.61%, and Germany, down 0.43%. The S&P 500 finished slightly positive for the week, up just five basis points, largely due to the continued rally in growth stocks which was propelled by a strong earnings report from Nvidia. The company beat expectations, which drove its price north of $1,000 for the first time. It also announced it would lift its quarterly dividend and implement a 10-1 stock split in June. 87% of Nvidia’s revenue came from data centers. The Russell 1000 Growth advanced 96 basis points and the NASDAQ rose 1.42%. Nvidia is the third largest holding of each benchmark at 9.37% and 7.11% respectively. The Russell 100 Value fell 140 basis points.
The VIX is at an all-time low which can be used as a metric to gauge investor sentiment. The one-day version of the VIX closed at a new low on Tuesday, and its decline has been drastic as it has already halved this month. The nine-day version is also very low, reaching its lowest since January 2020. The three-month VIX closed on Tuesday at the lowest since just before the recession scare of 2018.
Existing home sales came in at 4.14 million slightly below the 4.21 million estimate and last month’s 4.22 million results. Sales activity was stronger in homes with higher value of $1 million or more. Home purchases have continued to slow in response to higher rates, and now new additions are following suit. In recent years homeowners have opted for add-ons and upgrades instead of a home purchase. This includes new appliances, additions, etc. Home owners are now cutting back on those big-ticket investments in their homes that may require loans, and instead turning to more DIY remedies. Home Depot has reported that big-ticket transactions over $1000, are down 6.5% from Q1 2023, while Lowe’s saw a drop of 6.2%. Total spending on home improvement and repairs is expected to drop over 7% in Q3 this year to around $451B.
Target reported earnings this week and its fourth consecutive quarter of declining sales. Target’s CEO said shoppers’ biggest challenge was “inflation in food and household essentials,” which made up 52% of the company’s 2023 revenue. Ahead of its earnings report, the company announced cuts to prices on over 5K frequently shopped items. Furniture giant IKEA has made price cuts as well on thousands of products while other shops like Giant Foods, Aldi, and Walmart have also reduced prices.
India’s equity markets rose 2.43% for the week but could trail other markets as the election approaches. Modi has projected that his BJP party will pick up an additional 50 seats from the projected 350. He and his BJP party are expected to win by a large margin, but the Wall Street Journal is reporting that that margin could not be as wide as previously expected. Exit polls are prohibited until June 1st with final polls ending on June 4th.
Data Source: Blackrock, Bloomberg, Charles Schwab, CNBC, Goldman Sachs, J.P. Morgan, Morningstar, Morgan Stanley, Standard & Poor’s, and the Wall Street Journal.
Authors:
Jon Chesshire, Managing Director, Head of Research
Michael McNamara, Analyst
Sam Morris, Analyst