Ten Things You Need to Know May 9, 2023
Key Data Points
Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Wed), PPI (Thu), Import Price Index (Fri), and consumer sentiment (Fri).
May 3, 2023
The U.S. ISM Services PMI was at 51.9 in April, slightly up from 51.2 in March, according to today’s report by the Institute for Supply Management, indicating expansion for the fourth straight month at a slightly faster pace. The 12-month average was 54.5, reflecting consistently strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 51.8 for April.
At this week’s meeting of the Federal Open Market Committee, the target for the federal funds rate was increased by 25 basis points to a range of 5.00%-5.25%. This was the tenth consecutive meeting at which the funds rate target was raised. Over this period, the target for the fed funds rate has been increased by 500 basis points. The increase followed a similar size action at each of the last two meetings and pushed the rate up to its highest level since July 2007.
May 3, 2023
The Fed’s new policy statement provides the clearest hint yet that this 25bp rate hike is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation to convince officials to start cutting rates again later this year.
May 5, 2023
Nonfarm payrolls increased 253,000 last month (2.6% y/y) after rising 165,000 in March and 248,000 in February, revised from 236,000 and 326,000, respectively. Expectations had been for a 180,000 rise in the Action Economics Forecast Survey. The unemployment rate, measured in the household survey, fell to 3.4% in April from 3.5% in March. Expectations had been for 3.6%.
May 4, 2023
The European Central Bank raised its benchmark rate another 25 basis points to 3.25% on Thursday, the highest point since November 2008. The ECB said the “inflation outlook continues to be too high for too long,” while President Christine Lagarde said: “I think it’s fair to say that everybody agreed that increasing the rate was necessary and that second we are not pausing, that is very clear…and we know that we have more ground to cover.”
May 8, 2023
“Silicon Valley Bank was among the first to fall because its management apparently was the weakest among bank managers. But while that bank was poorly managed, its assets’ risks are not all that different from those of other banks. We can expect more trouble ahead, and the question that remains is whether the fallout can be managed.” – Thomas Hoenig is a former vice chairman of the FDIC, former President and CEO of the Federal Reserve Bank of Kansas City.
Wall Street Journal
May 1, 2023
The Nasdaq Composite index is close to exiting bear territory, up nearly 20% from its Dec. 28 low. The tech-heavy index has historically gained 30% during years in which it exited a bear market.
May 2, 2023
Despite concerns about a looming recession, mentions of an economic downturn or slowdown were limited in first-quarter earnings calls. The word “recession” has been used in only 41% of S&P 500 firms’ Q1 earnings calls, down from a peak of 59% during last year’s Q2 reports.
The Conference Board
May 4, 2023
According to the Conference Board’s CEO confidence measurement, ninety-three percent of CEOs reported they are preparing for a recession in the next 12 to 18 months, though 87% continue to believe the recession will be short and shallow.