Market Review April 24, 2024

The economic data released on Wednesday, April 24, 2024, offers a diverse view of the U.S. economic environment, focusing on manufacturing strength, energy supply fluctuations, and the projection of economic growth for the first quarter. This collection of data has the potential to significantly influence market sentiments and pricing behaviors in various asset classes.

Today's Event Overview

• Core Durable Goods Orders (MoM) for March reported a rise of 0.20%, falling slightly short of the forecasted 0.30%, but improving from the previous 0.10%. This data suggests a modest strengthening in the demand for durable goods, excluding transportation items, which is a positive signal for underlying manufacturing health.
• Durable Goods Orders (MoM) for March showed a significant increase of 2.60%, slightly above the expected 2.50%, and a substantial jump from the previous 0.70%. This indicates a robust demand for durable goods, reflecting heightened business optimism and consumer spending capabilities.
• Crude Oil Inventories saw a significant draw of -6.368 million barrels, starkly contrasting with the anticipated increase of 1.600 million barrels. This unexpected drawdown signals stronger than anticipated demand or supply constraints, a crucial factor for energy markets.
• Cushing Crude Oil Inventories also decreased by -0.659 million barrels, against a marginal previous increase, pointing to specific tightness in the U.S. oil storage hub.
• Atlanta Fed GDPNow for Q1 was adjusted to 2.70%, below the earlier estimate and forecast of 2.90%. This downward revision may reflect some concerns about the pace of economic growth.
• 5-Year Note Auction yielded a rate of 4.66%, higher than the previous rate of 4.24%, indicating rising yields which may reflect investor sentiments towards inflation expectations and future economic conditions.

Impact on USD

• The robust durable goods orders suggest an underlying economic strength, likely supporting the USD as it reflects better growth prospects. However, the mixed signals from the Core Durable Goods and the Atlanta Fed GDPNow revision may temper some of this optimism.

• The sharp reduction in crude inventories, usually a sign of higher energy costs, could put upward pressure on inflation, which might lead the Federal Reserve to adopt a more hawkish stance, potentially boosting the USD.

Impact on Gold

• Gold may face downward pressure as the data potentially boosts the USD and increases bond yields. Typically, stronger economic indicators and higher interest rates diminish the appeal of non-yielding assets like gold.

Impact on Equity Futures

• Positive data on durable goods orders may boost equity markets, particularly sectors related to manufacturing and industrial goods.

• However, concerns about economic growth from the Atlanta Fed's GDPNow forecast and higher bond yields could introduce some caution among equity investors.

Today’s mixed economic reports provide both reassurances and caution, reflected in the complexity of asset pricing dynamics observed. The markets may experience volatility as investors digest the implications of stronger industrial activity against a backdrop of potential inflationary pressures and moderated economic growth expectations.