Up Day to End the Week! 🤘

🔮 Welcome back to Finsights, fellow financial wizard. Let’s get you up to speed on the market with a flick of your finger! 🪄

• 💃 Markets mostly up

• 📝 Tech continues to pave the way

• 🎙️ PCE announcements and a little explanation

⬇️🐻 Market Dance – Stocks were cheering on Friday, with tech leading the charge (Nasdaq stole the show!). 📈 However, the celebration was a bit muted for the RSP and R2K, which both trailed behind the SPX. Over in the bond market, we saw a split decision, with 2-year yields (sensitive to Fed actions) inching up 3bp, while longer-term yields took a tiny dip. The DXY called it a draw, ending up pretty flat. 🌐 For commodities, Brent oil picked up the pace, rallying around 110bp, while US natural gas dropped by 550bp. Bitcoin and gold had a similar tune, both rising slightly. 💰

🎢 Fri-yay! – Stocks were up, up, up! This uptick extended Thursday's good vibes, supported by a likely resolution to the debt ceiling issue in Washington, strong earnings reports, and economic data suggesting a solid growth path. It seems like the FOMO (Fear Of Missing Out) bug bit a few bears, turning them into chasers. 🐻📈🤷‍♀️

🎤💔 How we’re thinking about stocks – Earnings remain king and continue to be a boon. While the Fed may be done with hikes for now, there's a growing likelihood of more action if the economy and inflation continue their robust performance.🏦💵

A little word of caution: the recent FOMO-driven buying could create unstable grounds, especially when the reasons given for jumping on the stock bandwagon are a bit iffy. This is particularly noticeable in the buzz around AI. While companies like MRVL are bullish about AI, it's important to note that AI made up only around 3% of their revenue last fiscal year and will still be under 10% this year.

Moreover, it's puzzling why funds are gushing towards companies like NXPI, ON, MCHP, etc., especially after Analog Devices recently hinted at a downturn in auto and industrial markets. 🤔

Lastly, let's not fool ourselves that a resolution to the "debt ceiling" issue is a solid reason to pile into stocks. While it's good news, the risk of the Treasury defaulting was always pretty low, and the market never really panicked about it. Plus, a debt ceiling deal does come with some minor drawbacks.

🤔 What's PCE? - Alright folks, picture this. You're at a buffet and you're loading up your plate, but your eyes are bigger than your stomach. That's kind of what's happening with inflation.

You see, the Personal Consumption Expenditures (PCE) - that's like the official scorekeeper of how much we're eating, inflation-wise - showed that we ate more in April than we did in March. Now, for those of you new to the economics party, that's not a great look. It's like going for a third serving of dessert when you know you've had enough.

This 'buffet binge' could start making stocks look like the steep tab at the end of the night. Two days in a row, at the crack of 8:30 am ET, inflation numbers haven't been good news. It's not enough to make the Fed (think of them as the restaurant manager) hike up prices in June, but if job numbers, inflation data, and some other stuff come out scorching hot, they might just do it.

But here's the kicker: the Fed's already done a fair bit of tightening. It's like they've been quietly removing dishes from the buffet for the past year. They've hiked up prices, reduced how much they're spending, and made it harder for banks to lend out money. Plus, they're pretty comfy right now, with their rates higher than inflation. It's like they're sitting back with a full belly, watching the rest of us scramble.

Yields have been on an upward trek, like that one super-fit friend who insists on taking the stairs instead of the elevator. That's making stocks look even less attractive - like choosing a salad when there's pizza. The market is now expecting the Fed's rate to be around 5% by year's end, which is basically where we're at right now. So, those rate cuts we were hoping for later this year? They might have left the party early.

Remember folks, moderation is key. No one likes a buffet binge hangover! 🍕📈🍨

🌯 That's a wrap for the day. 🌯

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Fin-specto Revelio!