US equities register best Q1 performance since 2009

Shares in the US closed mixed on the last trading day of Q1, just ahead of the Easter break.  The S&P 500 added 0.1%, hitting a new high, while the Dow Jones gained 47 points.  However, the Nasdaq ended 0.1% lower, as investors awaited the release of the Fed’s preferred inflation measure and Chair Jerome Powell’s comments the following day.  For the quarter, the S&P 500 gained 10.2%, marking its best first-quarter gain since 2019.  The Dow Jones added 5.6%, its strongest first-quarter performance since 2021, While the Nasdaq climbed 8.6%.  In European markets, the Stoxx 50 index closed marginally above the flatline, reaching a new 23-year high on Thursday, amid continued support from the dovish turn for major central banks earlier in the month. 

Summary for 01.04.2024 

• Asian equity markets displayed a mixed performance this morning, as investors evaluated various economic reports. Chinese manufacturing activity in March reached its highest level since February 2023, while Japan’s Tankan survey indicated a decline in sentiment among large manufacturers for the first time in a year. South Korea’s trade figures and manufacturing PMI data were also scrutinised. Shares in Japan declined, while South Korean and Chinese equities rose. Markets in Australia and Hong Kong were closed for Easter Monday. 
• US equity futures surged at the beginning of the week, following a strong first quarter, while European markets are mostly closed today. 
• WTI crude futures surged to $83.5 per barrel on Monday, marking a five-month high. Investors are eagerly awaiting OPEC+’s meeting, anticipating the group to uphold current output policies. Russian Deputy Prime Minister emphasised prioritizing output cuts over exports. Ukrainian drone strikes and Gaza peace efforts are influencing supply dynamics. Meanwhile, Chinese manufacturing expansion continues to bolster the oil demand outlook. 
• China’s Manufacturing PMI soared to 50.8 in March, the first growth in six months, driven by increased output, new orders, and improved business confidence. Simultaneously, the Non-Manufacturing PMI rose to 53.0, marking 15 consecutive months of expansion, with softened declines in new orders and enhanced sentiment. 
• In another positive development, China’s new home prices experienced their fastest growth in over two and a half years in March compared to the previous month, increasing by 0.27%.  Despite easing regulations in some cities like Beijing, total sales by value dropped 49.0% year-on-year in the first quarter, indicating ongoing challenges for the market.  
• Last Friday, Fed Chair Powell remarked that February’s PCE inflation data aligns with Fed expectations, indicating a positive trend. However, recent readings fall short of last year’s standards. Powell suggested a cautious approach to interest rate cuts, advocating for confidence and patience. The Fed remains prepared to maintain rates if inflation doesn’t align with expectations. 
• In February, US personal consumption expenditure prices rose 0.3% month-over-month, below forecasts. Service prices increased 0.3%, goods 0.5%. Annual rate reached 2.5%, as projected, up from lowest since Feb 2021. Core PCE inflation slowed to 0.3% from Jan’s 0.5%, aligning with expectations. Food prices rose 0.1%, energy surged 2.3%. Annual core inflation eased to 2.8%, a three-year low. 
• Citigroup anticipates the Federal Reserve will initiate interest rate cuts in June, aligning with the central bank’s easing cycle expectations. Despite differing views within the Fed, Citi underscores the importance of inflation dynamics and forecasts a slowdown in job growth, suggesting a total of 125 basis points in rate cuts for 2024. 
• Citigroup equity strategists anticipate a shift in the US equity rally towards more defensive market segments influenced by interest rates. They maintain a modest overweight in growth sectors, downgrading technology to market-weight while elevating consumer discretionary to overweight but warn about the sustainability of the current market rally citing the Levkovich Index. 
• Sam Bankman-Fried, former FTX co-founder, received a 25-year prison sentence for orchestrating a multi-billion dollar fraud scheme, impacting the crypto industry significantly. Despite remorse claims, the judge emphasized the severity of his crimes. Bankman-Fried’s intention to appeal signals a potential lengthy legal battle ahead, with FTX customers still grappling with lost assets. 
• Home Depot announced plans to acquire SRS Distribution for $18.25 billion, aiming to boost sales amid slow home improvement sector recovery. With a focus on professional customers like contractors and roofers, the move expands Home Depot’s market potential to around $1 trillion, leveraging SRS’s expertise and distribution network. 
• JD Sports issued a positive FY24 trading update, expecting profit before tax within £915-935 million range, with total sales reaching £10.5bn and 215 new stores opened globally. Shares surged over 6% in London trading. Despite a slowdown in Q4 2024, the outlook contrasts with ASOS’s revenue decline. JD expects FY25 PBT slightly below consensus estimates. 
• Apple‘s equity saw a significant decline in Q1, but analysts like Bernstein remain optimistic, citing its undervaluation and intact fundamental business model. Despite concerns about iPhone sales, the upcoming iPhone 16 with AI capabilities could drive upgrades. Services, not just iPhones, are seen as key drivers of growth amidst regulatory scrutiny. 
• Morgan Stanley analysts maintained an Overweight rating and $320 price target on Tesla despite reducing their first-quarter delivery forecast to 425,000 vehicles. They cited recent price increases and adjusted earnings per share forecasts for the quarter to $0.24, with FY24 EPS unchanged at $1.51. 
• Bank of America upgraded Estée Lauder Companies Inc. from Neutral to Buy, raising the price objective to $170. BofA anticipates earnings recovery driven by company initiatives and macro factors, projecting FY26 EPS at $5.85, potentially reaching $6.49. EL’s four-pillar strategy aims for improved margins and growth. 
• MicroStrategy faced a significant dip, dropping up to 11% on Thursday, following Kerrisdale Capital Management’s announcement of being long on Bitcoin while shorting MicroStrategy shares. Kerrisdale’s report challenges the high premium of MicroStrategy, arguing that its growth outpacing Bitcoin’s rise is unjustified, given alternative direct Bitcoin investment options. 
• Palantir share dropped over 6% during Thursday’s trading session following its first Wall Street downgrade in over a month. Monness, Crespi, and Hardt downgraded the share to Sell, citing overvaluation despite its potential in AI and geopolitics. They issued a $20 price target, highlighting challenges in government contracts and high valuation. 
• Lynx Equity Strategies anticipates a potential 20% to 30% surge in Intel equity, driven by significant catalysts. Intel’s April 2nd event is expected to unveil new reportable segments and CHIPs act monies, providing clarity and potentially boosting free cash flow outlook. Additionally, the launch of Sierra Forest in early 2024 may generate investor interest despite initial scepticism. 

• Reddit shares fell for the second consecutive day on Thursday amidst reports of short-sellers targeting the equity. Despite a strong debut, the shares witnessed substantial bearish bets, with its share price declining over 11% on Wednesday and a further 11.2% on Thursday. Hedgeye Risk Management’s report suggesting a potential 50% downside contributed to the decline. 
• The Dutch government plans to invest €2.5 billion in infrastructure in Eindhoven to retain ASML, Europe’s largest tech firm. ASML is considering its future growth location. ASML’s complaints about policy prompted action, with concerns raised by other Dutch blue-chip firms about populist policies impacting their operations and long-term viability. 
• GLJ Research upgraded Cleveland-Cliffs to Buy, citing factors like the “Trump Put” and “Biden Put,” alongside an expected rotation from tech to value shares. Despite underperforming the S&P 500, Cleveland-Cliffs’ resilience amid steel price drops and political landscape analysis contribute to confidence in its growth potential. 
• In the week ahead, the United States will see investor attention on key labour market reports like non-farm payrolls and unemployment rates, alongside data such as JOLTS job openings, ISM Manufacturing and Services PMI, factory orders, and foreign trade. Elsewhere, March inflation rates from several economies will be closely watched. Trade data from Canada, Brazil, and Australia will also offer insights. Additionally, market sentiment will be influenced by unemployment rates in Canada and the Euro Area, as well as India’s interest rate decision.