What to know today

  • The market is rate-cut obsessed.
  • What’s frying $TSLA.
  • Are we all gold bugs now?

Expansion Is Good

So why the mini sell-off?

Monday was a classic good-news-is-bad-news down day.

Stocks opened the first session of the new month on a positive note but turned negative shortly after the release of fresh reports on US manufacturing.

Investors, traders, and speculators read the data and understood it to mean the Federal Reserve might be less likely to announce a rate cut in June.

The key here is that the Institute of Supply Management’s manufacturing index showed expanding activity in March for the first time since September 2022.

It was up by 2.5 percentage points from 47.8 in February to 50.3 – 50 is the dividing line between “contraction” and “expansion.”

We’d seen sixteen consecutive months of contraction until yesterday morning.

The ISM Manufacturing Purchasing Managers Index expanded in March for the first time since 2022.

The production sub-index was higher by 6.2 points, the biggest single-month gain in almost four years, to 54.6, its highest level since June 2022.

New orders rose 2.2 percentage points back into expansion territory at 51.4, up from 49.2 in February. And employment contracted less than in February, rising 1.5 percentage points to 47.4 in March from 45.9.

The ISM said that food, beverage and tobacco products, fabricated metal products, chemical products, and transportation equipment, which are among the six biggest manufacturing industries and account for a combined 54 percent of manufacturing gross domestic product, all reported expansion in March.

ISM Manufacturing Business Survey Committee Chair Timothy Fiore said in a statement accompanying the data release that demand “remains at the early stages of recovery, with clear signs of improving conditions.”

OK, but…

Markets are forward-looking, and, as Mish Schneider observes in her Weekly Market Outlook, one particular vehicle is showing some skeptical signs.

We entered April and the second quarter with the major equity indexes at all-time highs. Meanwhile, the iShares iBoxx High Yield Corporate Bond ETF $HYG is well off its highs and tested major support on Monday.

Junk bonds are a pretty good barometer for whether we’re in a “risk on” or a “risk off” environment.

We have incoming data on factory orders and job openings today as well as speeches from two Fed presidents and a Fed governor. On Wednesday, we’ll hear from Fed Chair Jerome Powell again.

It’s all pointing to Friday’s release of March nonfarm payroll data, though, and how that big piece fits into the inflation-and-rate-cuts narrative.

But the price action goes on.

deep dive

What Will Elon Do?

He’s now just the third-richest man in the world.

Elon Musk has fallen behind Bernard Arnault, the CEO of LVMH, and Jeff Bezos, the founder of Amazon.com, in the Bloomberg Billionaires Index.

He’s shed more than $40 billion in net worth so far this year.

Tesla $TSLA was down 0.32 percent during Monday’s regular trading session and was lower by 0.34 percent early in after-hours action.

Pretty tepid, actually, ahead of potential price-shaking news coming this morning.

TSLA is expected to reveal vehicle delivery numbers for the January-to-March quarter today. The FactSet consensus forecast is for 457,000.

Year-to-date share-price performance for Nvidia $NVDA, Meta Platforms $META, Amazon.com $AMZN, Microsoft $MSFT, Alphabet $GOOG, Apple $AAPL, and Tesla $TSLA.

Other analysts suggest TSLA is on track to deliver its first year-over-year sales decline in the post-pandemic era.

Musk warned in January that growth would be notably slower this year as the company boosts Cybertruck production.

Meanwhile, Warren Buffett-backed China-based competitor BYD reported a 13 percent year-over-year rise in “new energy vehicle” sales during the first quarter.

BYD sold 626,263 “new energy vehicles,” including 300,114 pure EVs and 324,000 plug-in hybrids. Management said sales were up 46 percent in March, driving the quarterly gain.

Let’s see how TSLA’s numbers compare.

deep dive |
April 2, 2024

What Will Elon Do?


Gold Is Going Higher

Even non-productive assets have prices that move.

Warren Buffett is not a fan of gold.

In July 2003, The Times of London reported that during a 1998 speech at Harvard, Buffett said, “It gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

OK, but…

Take a look at this chart, courtesy of my friend Ian Culley of All Star Charts:

Four-year monthly closing price history for gold futures, which are trading near all-time highs.

According to Ian, “The gold rally off the 2018 lows led to a multi-year consolidation that is now resolving higher.” This uptrend, in other words, is intact.

The Gold Miners ETF $GDX is also enjoying a healthy rally and is now trading above a level of former resistance that now looks like new support.

As Mish Schneider points out at the top of her Weekly Market Outlook, price action in the junk bond market shows some “risk off” to it lately.

At the same time, price action for gold miners shows some risk-seeking behavior.

Whether this gold breakout reflects flight to a traditional safe haven ahead of something breaking or a flight to a traditional store of value amid rising inflation is an interesting question.

In this HODLers-and-gold bugs market, does it really matter?

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