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Is Fed in a big hole? BofA’s survey shows spending expectations are rising

For the May edition of their Monthly Consumer Survey Series, Bank of America (BofA) analysts surveyed approximately 1,000 US respondents this month to learn about their spending expectations.

The bank said the findings revealed a significant increase in ‘New Vehicle’ spending expectations for the next 12 months.

Specifically, 43.0% of respondents anticipated buying a new vehicle in May, up from 35.8% the previous month and 41.2% last year.

“This is the highest level since Jan 2023 and showed the largest sequential improvement in all four big-ticket categories,” BofA’s team noted.

“Plans to buy a New Home over the next 12 months have returned to 20%+ levels for the first time in twelve months and increased from 18.5% last month to 24.3% in May,” they added.

Meanwhile, grocery remains the top category where over 35% of respondents expect to spend more in the next three months.

Home Improvement & Renovations also saw over 30% of respondents in May expecting to increase spending in the next three months, representing a notable rise both sequentially and year-over-year. Home Furnishings experienced a sharp increase in spending expectations, from 23.33% in May 2023 to 27.10% in May 2024, BofA highlighted.

In terms of inflation and promotion expectations, fewer than 65% of respondents continue to notice the most dramatic price increases in the Grocery category, down from 72.5% last year and 72.1% last month.

Similarly, fewer respondents are noticing price increases at Restaurants/Bars.

Intriguingly, about 42% of respondents in May have not noticed an increase in discounts or promotions, down from 49.4% last year and 49.9% last month.

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S&P 500 rally not expected to accelerate from current levels: JPMorgan

The S&P 500 Index rebounded from its initial downside targets near 5000, moving back above the March-April pattern breakdown area and the 50-day moving average.

According to JPMorgan technical strategists, this move disrupted the tactical bearish trend momentum, creating a more ambiguous short-term technical setup, while preserving the medium-term rally structure.

“The market is showing signs of tactical rally deceleration near the 5219 Oct 2022-Oct 2023 equal swings and 5261 Mar peak,” strategists said in a Tuesday note.

“That price action leaves us looking for that zone to continue to cap the current range, but we recognize that tomorrow’s CPI print will likely determine how the market responds to that resistance,” they continued.

To derail the April-May rebound, a tactical break below the 5064-5145 range is needed, JPMorgan highlighted.

On a broader scale, low-frequency price patterns and cross-market signals related to the duration of the yield curve inversion suggest a potential for medium-term rally exhaustion.

Strategists suspect the current range may evolve into a distribution pattern, with key support around 5000. A failed attempt to sustain a break above the March peak of 5261, followed by a drop below the 50-day moving average at 5145, “would add material conviction to that view,” they noted.

“Alternatively, an unexpected rally acceleration from current levels would turn our attention to the 5414 Oct 2022-Oct 2023 equal swings objective (in percentage terms) as the resistance level,” said JPMorgan’s team.

The S&P 500 closed at 5246 on Wednesday, sitting just 0.2% below its all-time highs.

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Are meme stocks back? GameStop, AMC surge on strong retail demand

The phenomenon of meme stocks appears to be making a comeback, with shares of GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) recently experiencing significant surges. 

This renewed interest is driven by a resurgence in retail investor enthusiasm, reminiscent of the frenzied trading activity that once sent these stocks to unprecedented heights. The question now is,  are meme stocks back?

What are meme stocks?

Meme stocks are shares of companies that gain popularity and see dramatic price movements primarily due to social media hype and online forums rather than the company’s underlying financial performance or fundamentals. These stocks often become the subject of viral memes and extensive discussion on platforms like Reddit, particularly in communities such as r/WallStreetBets.

Why are meme stocks rallying again?

After an extended break, Keith Gill, known as “Roaring Kitty” on social media, made a comeback on Sunday evening posted for the first time on X (formerly Twitter) in almost three years.  The post has reignited the enthusiasm of individual investors. This resurgence coincides with further rally in GameStop’s stock price as well as a jump in fellow meme stock AMC Entertainment. 

Speaking to Investing.com, Joe Vezzani, CEO of LunarCrush, a social intelligence company that provides insights into how social sentiment can drive stock prices, said retail traders are “rejoicing with the return of Roaring Kitty.”

“Roaring Kitty’s comeback not only boosted GameStop’s stock but also underscored the power of individual investors in today’s market, especially when rallied by a charismatic leader,” says Vezzani. 

“His initial posts years ago on Reddit under the moniker DeepF——Value and subsequent actions catalyzed a historic trading frenzy that shook the foundations of Wall Street, challenged hedge funds, and sparked a reevaluation of trading regulations.” Vezzani believes this could be the catalyst the markets are looking for to break through the inflation and interest rate noise, giving the everyday investor something to rally around. 

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“In a world that trades narratives, the return of Roaring Kitty is bullish for small caps and crypto,” he adds. 

How is the meme stock rally different this time?

Of course, assessing whether the meme stock rally is different this time is difficult to tell at this stage. However, LunarCrush’s platform is said to have captured a significant spike in social activity surrounding GameStop. 

According to the firm, since Roaring Kitty’s latest post, social interactions have increased by 162.9%, and posts created have increased by 37.6%, with more than 11.3 million interactions observed. The surge in social metrics has coincided with a sharp increase in the company’s stock price and trading volume, highlighting the significant influence of social media on financial markets.

On Monday, GameStop shares jumped by more than 74%, following that up with a 60% rise on Tuesday. For the year-to-date, it is now up 100%, while over the last month, it has surged 219%. 

When assessing sentiment on LunarCrush, it indicates that 33% of the interactions are positive, with YouTube leading as the platform with the most positive sentiment towards GameStop at 52.3%. Furthermore, LunarCrush notes that the positive sentiment is reflected in the enthusiastic engagement of 3,020 creators who have collectively generated over 8,521 posts, driving a robust dialogue about the stock’s future.

The firm believes that if meme stocks can sustain a rally for several weeks, it could “reignite excitement in the markets, particularly for retail traders who have been largely inactive.”

“Until now, the ‘Robinhood’ trader has been conspicuously dormant, with little presence in market bids,” they write. “A modest but persistent rally in meme stocks could very well reactivate this group.”

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LunarCrush feels that retail traders, who have been parked in 5% money markets for over a year, are now showing a growing appetite for higher returns.


5 analysts discuss Fed and Powell’s next moves as CPI data shows signs of cooling

The U.S. consumer price index (CPI) for April indicated a modest slowdown in inflation, which was roughly in line with market forecasts.

The CPI rose 3.4% year-on-year, a slight deceleration from the 3.5% increase reported in March. On a month-to-month basis, the index saw a 0.3% rise, which is less than the 0.4% anticipated and equal to the growth in March.

The Bureau of Labor Statistics (BLS) pinpointed shelter and gasoline prices as the primary contributors to the index’s monthly rise, accounting for over seventy percent of the overall increase.

The core price measure, which excludes volatile items such as food and energy, also reflected a modest slowdown. Year-on-year, the core CPI increased by 3.6%, compared to the 3.8% growth seen in the previous month. The monthly increase for the core index was 0.3%, down from the 0.4% rise in March.

In related news, U.S. producer prices for April showed a more significant increase than expected, reinforcing the view that inflation pressures are persisting into the second quarter. As a result, investors are adjusting their expectations for U.S. interest rate cuts.

Market predictions now suggest less than 50 basis points of rate reductions by the end of December.

Despite the slight slowdown, the numbers remain above the Federal Reserve’s target rate of 2%, which is considered necessary for stable and sustainable growth. Here are the first reactions from Wall Street analysts.

Evercore ISI: “[T]he cooling of inflation is continuing as most leading indicators for inflation are falling, though it will hit tough comps in two months. Retail sales release was quite soft. These releases suggest lower Treasury yields and inflation expectations… We tentatively estimate payroll employment will climb 150K in May. The unemployment rate could stay at 3.9%.”

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RBC Capital Markets: “The on-consensus CPI turnouts in the U.S. in April is a small relief but far from a cause of celebration. Price pressures moderated slightly but for the most part remained heightened, as readings for core measures stayed high… [W]e expect the Fed will stay on the sideline for most part of the year before opting for a first rate cut later in December. That’s of course contingent on CPI readings continuing to move lower in the interim.”

Wolfe Research: “We continue to believe we are past peak Fed hawkishness, and expect softer inflation and growth data in the near term to make the case to the FOMC for a September cut (as well as December).”

Wells Fargo: “We believe it will take at least a few more benign inflation readings for the FOMC to feel sufficiently confident to begin lowering the fed funds rate. We continue to look for the first rate cut from the FOMC to come at its September meeting, but any additional bumps in the road would likely push that timing back, absent a marked deterioration in the labor market.”

Morgan Stanley: “This weaker print compared to 1Q24 is the first month this year adding to the convincing evidence the Fed needs to start cutting in soon. We still expect more deceleration ahead, especially in 2H24, and we maintain our call for a first cut in September this year.”


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Consumer price growth slowed marginally in April; CPI rose an annualized 3.4%

Investing.com – U.S. inflation slowed marginally in April, while the gauge of core prices closely watched by the Federal Reserve decelerated slightly but remained stubbornly elevated.

According to data from the Bureau of Labor Statistics (BLS) on Wednesday, the U.S. consumer price index in April rose 3.4% on an annualized basis, in line with expectations, a small slowdown from the 3.5% growth seen the previous month.

On a monthly basis, the index rose 0.3%, a small slowing from the expected 0.4% growth, which had also been seen in March.

Rises in the prices of shelter and gasoline were the main factors behind the increase, according to the BLS, as combined these two indexes contributed over seventy percent of the monthly increase in the index for all items.

Meanwhile, the core reading, which strips out volatile items like food and energy, rose 3.6% year-on-year, a smaller rise than the 3.8% growth seen in March. On a month-on-month basis, the core figure increased by 0.3%, below the 0.4% growth seen in March.

The main indices behind the rise in the core figure were to do with shelter, motor vehicle insurance, medical care, apparel, and personal care, BLS added.

The numbers were still above the Fed’s desired rate of around 2% to achieve stable and sustainable growth, with inflation so far proving difficult to tame. 

“Inflation in Q1 was notable for the lack of further progress,” Federal Reserve Chair Jerome Powell said, in a speech on Tuesday. 

“Confidence in inflation moving back down is lower than it was. My confidence on that is not as high as it was before.”

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U.S. producer prices increased more than expected in April, data showed on Tuesday, indicating that inflation remained stubbornly high early in the second quarter.

Investors have had to dial back their expectations of U.S. rate cuts this year, and are now pricing in less than 50 basis points of easing before the end of December, compared with 150 bps of easing anticipated at the start of 2024.

U.S. stock futures rose following the inflation data, with the blue-chip Dow Jones Futures contract gaining 180 points, or 0.5%, the broad-based S&P 500 adding 28 points or 0.5%, and the tech-heavy NASDAQ Composite increasing by 88 points or 0.5%, by 08:50 ET (12:50 GMT).


Dow, S&P 500, Nasdaq notch record close as cooling inflation boosts rate-cut hopes

Investing.com – The Dow, S&P 500 and the Nasdaq closed at record highs Wednesday, as consumer inflation cooled more than expected following three months of upside surprises, boosting hopes for sooner rate rates and sending Treasury yields sharply lower. 

At 16:00 ET (20:00 GMT), Dow Jones Industrial Average rose 349 points, or 0.9%, S&P 500 rose 1.2% higher, and the NASDAQ Composite rose 1.4%. All three major averages, however, are on pace for a record close.

Cooling CPI helps boost rate cut hopes, sends Treasury yields lower

The overall consumer price index slowed to 0.3% pace in April from 0.4% a month earlier, slower than the 0.4% pace economists had expected, boosting hopes that the disinflation trend is back on track. That took the annual figure to 3.4%, down from a 3.5% pace.  

The core CPI, which strips out volatile food and energy prices, rose 0.3% versus March levels, while the annual core CPI inflation rate eased to 3.6% from 3.8% in March.

The slowdown in consumer prices came a day after a producer price inflation came in hotter than expected. 

But on the heels of the hot producer price report, a “cooler-than-expected consumer price report has immediately eased concerns of rapidly rising inflation, fueling investors’ hopes for rate cuts in the coming months,” Stifel said in a Wednesday note.

Traders see a 50.5% chance that the U.S. central bank will start cutting rates in September, according to the CME FedWatch Tool.

Treasury yields fell sharply on the news with the 10-year Treasury down 10 basis point to 4.34%.

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Elsewhere on the economic front, retail sales were unchanged in April, trailing forecasts for a 0.4% gain, as consumers continued to struggle.

Tech rally picks up steam on falling yields

Big tech and chip stocks including Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL), META (NASDAQ:META), and Nvidia (NASDAQ:NVDA) led the broader market rally, with latter boosted by signs that demand for its existing chips haven’t been impacted ahead of the release of its next-gen Blackwell GPUs. 

“Despite anticipation of next-generation Blackwell GPUs in the 2H, we see limited signs of a demand pause KeyBanc Capital market said in a note. The bullish remarks come just a week ahead of the chipmaker’s quarterly results due May 22. 

Boeing falls on legal worries

Boeing Co (NYSE:BA) fell 2% after the Department of Justice said the airplane manufacturer violated a settlement that prevented it from from facing criminal prosecution related to two fatal 737 Max crashes.

Boeing, however denied the claims that it had violated the settlement and said it had honored the terms of the agreement. 

Meme stock rally fades

So-called meme stocks saw more volatile trading Wednesday, with AMC Entertainment (NYSE:AMC) stock slumping 20% after the cinema chain announced a debt-for-equity swap, which will see it issuing over 23 million shares.

GameStop (NYSE:GME) stock fell 18%, with the video retailer handing back some of this week’s sizzling gains.

Before Wednesday, GameStop and AMC were up 179% and 135% this week, respectively.

(Peter Nurse, Ambar Warrick contributed to this article.)