SignalPlus Macro Research Report (20240103): Economic data is weak, market enthusiasm is still high

The first set of U.S. economic data of the new year was weak, with the manufacturing PMI falling again by 1.5 to 47.9, the lowest level since August last year. The index will be in contraction for 10 of the 12 months in 2023, while the Atlanta Feds The GDPNow model forecast was also lowered to 2.06% from the previous 2.26%. In addition, PMI comments also pointed out that the deceleration of output was the fastest in half a year, the decline in orders was also worsening, and the manufacturing industry may drag down GDP in the fourth quarter. Performance.

This week will be a data-intensive week, including ISM manufacturing and JOLTS data on Wednesday, weekly unemployment claims data on Thursday, and ISM service industry and non-farm employment data on Friday. Employment and CPI data should be the start of the year. The biggest risk event, but judging from yesterdays price reaction, the market may not be patient enough to wait until these data are released.

The theme of the first trading day in 2024 is de-risking. Although Japan is still on holiday, the fixed income market is very active (trading volume exceeds 2 times the 30-day average trading volume), risk assets have fallen across the board, and bond yields have jumped across the board6 Basis points, the Nasdaq index fell 1.6%, oil prices fell about 2%, the dollar strengthened relative to most currencies, and market forecasts that the probability of the Federal Reserve starting to implement easing policies in March fell to 75% from 85% last week, and as of June The implied rate cut dropped to 72 basis points, reaching a peak of 83 basis points.

As companies seized the opportunity of temporary declines in yields and new capital off the market, bond supply rebounded sharply as expected, with more than 17 investment-grade bond issuances and total supply exceeding $29 billion; in addition, the latest treasury borrowing estimate was $1,500 -175 billion US dollars, further exacerbating the problem of supply digestion, causing the 10-year U.S. Treasury yield to return to nearly 4% in a bearish trend.

Traders remained cautious at the beginning of the year, and the stock market was also weak across the board. Value and defensive stocks +1% performed relatively well, while momentum and technology stocks fell 1.5% and 2.5% respectively. The commodity market also fell by about 1% across the board. However, Inflation-protected assets performed relatively well (5-year inflation swaps up 4 basis points) and investors may seek upside protection on upcoming employment data (wage growth) and CPI data.

In terms of individual stocks, concerns about falling iPhone demand led some sell-side analysts to downgrade their ratings, causing Apples stock price to fall more than 2.5% on Tuesday, evaporating US$75 billion in market value; and concerns about government export restrictions also caused Nvidia and the entire semiconductor index to drop on the same day. It fell more than 3%, the largest one-day drop since October, and overshadowed the good news that Teslas fourth-quarter deliveries exceeded analysts expectations.

Despite some market turbulence, stock investors remain bullish, with the market seeing a greater than 40% chance of SPX rising more than 10% in 2024 based on the option implied price distribution, while the 2-year 25 Delta put premium is At its cheapest level in nearly 20 years, it shows the market is not interested in downside protection.

On the crypto side, BTC topped $45,000 for the first time since late 2022, although mainstream altcoins including Solana, Avalanche and Ripple have fallen around 3% in the past 24 hours, on top of expectations for ETF approval that is about to reach a crescendo. , there is no new news in the market. BTC futures liquidation data are relatively balanced on both long and short sides. Implied and actual volatility have remained at a high level during this wave of trends. It is expected that there will be a chance to continue to remain high and volatile even after the approval is announced. The rate skew is clearly biased towards the increase.

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