Weekly Market Commentary May 6th to May 10th 2024

Total U.S. consumer credit increased $6.3 billion in March, below most estimates. Revolving credit, which includes credit cards, rose $152 million, while non-revolving credit, which includes auto and student loans, increased $6.1 billion. This was the smallest increase in revolving credit since falling three years ago and could represent a healthy development for consumer finances, if sustained. However, consumer savings continue to fall, increasing the need to rely on credit cards. Total revolving debt stands at over $1.3 trillion and has increased 37% over the past three years. With interest rates remaining at elevated levels, delinquencies have been on the rise and more banks are increasing minimum credit score requirements to take out loans.

Initial jobless claims for the week were higher than expected at 231,000. This is the highest reading in nine months, suggesting layoffs are increasing. It’s too soon to tell if this increase will be persistent, but if last week’s jobs report is any indication, it could be the start of a cooling labor market.

Federal Funds Rate probabilities still suggest two cuts in 2024; one in September and another in December. The FOMC dot plot suggests three cuts in 2024, however, this was last updated in March. The dot plot will be updated at the next Fed meeting on June 12th and will provide a clearer picture as to where the Fed stands with their 2024 outlook.

In a week with very little economic data, the equity markets drifted higher, continuing the momentum from the prior week. The S&P 500 rose 1.9% to 5,223, the NASDAQ rose 1.1% to 16,341, and the Dow Jones Industrials rose 2.2% to 39,513. Treasury yields were relatively flat with the 2-Year U.S Treasury finishing 5bps higher to 4.87% and the 10-Year slipping 1bp to 4.50%.

In contrast to this week, next week will be packed with economic data. Meaningful points of interest will be inflation, retail sales, and housing data.