Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, April 1. Happy April Fool’s Day and welcome to the second quarter! The Bottom Line segment of today’s podcast starts at (2:18) for listeners who want to skip ahead.
State of Play
A slow start to the week with markets in Europe and Asia still closed for Easter Monday. No such issues in the US where markets are due to open at their regularly scheduled time and futures are active. As we look at our board of indicators at 0630, it looks like risk appetite is emerging from the long weekend:
Stock index futures are pointing to a higher open, led by tech with the Nasdaq up 0.6%. S&P 500 futures are up 0.4%;
Commodities are mixed. Gold continues to rally, up another 1.5% this morning and copper is up more than 1%. But WTI crude oil is flat, trading around $83/barrel and natural gas is down 2%;
Bonds are unchanged. The 2-year yields 4.60% whilst the 10-year yields 4.21%;
Cryptos aren’t doing much either. Bitcoin is down 1% to trade around $69,300.
Today’s Known Events
It’s a slow start to a relatively busy week, with the main event coming on Friday with non-farm payrolls. For today, ISM Manufacturing PMIs are out at 1000. Economists who were surveyed expect a reading of 48.5, up from the 47.8 recorded last month but still below the 50 level that separates expansion from contraction.
ISM also does a survey of manufacturing prices, which can be seen as wholesale prices for the US manufacturing sector. This number is expected to print at 53.3, up from the 52.5 recorded last month.
Construction spending is also out at 1000. We’re just now getting February’s figures, which are expected to show a 0.5% increase over January when they dropped 0.2% on the previous month.
The Bottom Line©️
Welcome to Q2. The first quarter was very positive, as discussed last week. Markets indeed appear pretty buoyant which raises the question of what might end this party. Of course we’ll have to see a bigger rally in the broader stock market first, to catch up with the gains in cryptos and everything AI.
Friday’s PCE Deflator came in exactly as forecast but the previous month was revised upward. Inflation doesn’t appear to be going anywhere and growth doesn’t seem to be slowing either. Yet none of this seems to be bothering investors.
Well, don’t fight the tape. If investors want to bid up risk assets then that is what they’re going to do. Whether that makes this a time to buy is another question entirely. Not for contrarians, that much is clear.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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ISM Manufacturing, Construction Spending