Thursday's Markets Update (May 25, 2023)
On Thursday, NASDAQ experienced a surge during the pre-market session, with a gain of 1.7%. The index closed at 12,698, surpassing Wednesday's closing value of 12,484. Semiconductors led this upward movement, with Nvidia seeing a significant increase of 24%, rising from a Wednesday closing value of 305 to 379.
Despite indications of a potential Federal Reserve rate increase, stock traders appeared to overlook fundamentals. On the other hand, BTC (with an opening value of 26,403 and closing value of 26,468) remained unaffected by the AI craze, which can be seen as a sign of the absence of retail buyers. BTC's increase was driven by technical factors and remained relatively modest.
Jobless claims rose to 229K in the week ending May 20th, slightly up from the previous week's low of 225K but below expectations of 245K. This suggests a strong labor market, potentially influencing the Federal Reserve's interest rate decisions.
There is further reinforcement for more Fed rate hikes, as indicated by the BEA. According to its preliminary estimate, the economy grew by 1.3% in Q1 2023, higher than the expected 1.1%. Consumer spending increased by 3.8% despite high inflation, while residential fixed investment declined at a faster pace. Exports surpassed imports. Nonetheless, Q1 2023 GDP growth remains the weakest since Q2 2022.
Other Markets Update:
UK: The retail sales balance, indicated by the CBI distributive trades survey, dropped sharply to -10 in May 2023 from the previous month's +5. It fell short of expectations, which anticipated +10. This suggests a contraction in trade due to high inflation. Retail employment declined for the third consecutive quarter, dropping to -48 in the year ending in May, the largest decline since February 2009. However, retailers remain optimistic for June, expecting sales volumes to stabilize with improved consumer confidence and lower energy prices.