The Day at a Glance | May 2 2024

The Top

• The Federal Open Market Committee (FOMC) decided to keep the federal funds rate range between 5.25% and 5.50%, additionally, it announced changes regarding thereduction in its balance sheet.

• The ISM manufacturing index for the US fell below market expectations in April. 

• The OECD has improved its global growth outlook for 2024 (3.1% vs. previous 2.9%) and 2025 (3.2% vs. previous 3.0%) due to better performance shown by the US economy. 

• Initial jobless claims in the US remained unchanged at 207,000 for the period ending April 27^th, its lowest level in 2 months. 

• Oil prices rose on Thursday, recovering after 3 days of losses that brought prices to their lowest since mid-March.

• Today’s reports: Apple, Amgen, Coinbase, and DraftKings. 

Economic Environment

The Federal Open Market Committee (FOMC) decided to maintain the federal funds rate range between 5.25%and 5.50%, and also announced changes regarding thereduction in its balance sheet. Yesterday, the FOMC released its monetary policy announcement, in which it kept interest rates unchanged, a decision widely expected by the market. It also announced that starting in June, the Committee will slow down the reduction pace in its balance sheet with the following changes: i) the reinvestment limit of Treasury Bonds will be reduced from 60 to 25 billion dollars, ii) the limit of 35 billion for Mortgage-Backed Securities was maintained, although reinvestment of principal payments will now be made in Treasuries. In the statement, the FOMC specified that the decision was made in an environment characterized by solid expansion in economic activity, strong job creation, and a low unemployment rate. However, in recent months, inflation has ceased to show progress in converging towards the 2.0% target. In our opinion, the fact that the Committee decided to add the lack of progress in reducing inflation to the statement suggests concern and uncertainty regarding itsfuture trend, implying that the current monetary stance will remain restrictive and cautious.

The US Manufacturing ISM fell below market expectations in April. The ISM indicator stood at 49.2 points and set below the 50 point threshold. Thus, April´sdata disappointed by coming in below the consensus´s forecast (50.1 points) and the previous month´s 50.3 point figure. This performance was mainly driven by a drop in new orders (49.1 vs. 54.1 previously), which was pressured by reduced demand. Regarding production (51.3 vs. 54.6 previously), it logged a slowdown but remained in expansion territory, supported by a decrease in order backlogs. Lastly, employment levels fell for the seventh consecutive month (48.6 vs. 47.4 previously), while prices recorded their largest increase since June 2022 (60.9 vs. 55.8 previously). Overall, April´s manufacturing ISM figures show that the sector continues to show signs of improvement; however, demand remains weak while cost pressures continue to worry businesses. 

Markets and Companies

Global markets with mixed sentiment. Major US indices closed the previous day with losses. This morning, markets started the day with positive figures, while quarterly reports and the key labor report are scheduled for later in the week: Dow +0.31%, S&P +0.46%, and Nasdaq +0.45%. In Europe, markets are recording losses, with the Euro Stoxx down -0.28% as investors reacted to the latest monetary policy decision from the US Federal Reserve. In Asia, markets recorded a contraction: Japan’s Nikkei 225 closed with a loss of -0.1% at 38,236.07 and China unchanged 0.0%. In Mexico, the IPC is down and stands at 56,629 points. The price of oil stood at $79 per barrel, due to an increase in inventories amidst weaker demand. Natural gas up (+2.20%). Meanwhile, metals are mostly down, with gold -1.5%, silver -1.8%, and copper -1.4%. Lastly, cryptocurrencies are up.

The exchange rate fluctuated during the early hours, reaching a minimum of 16.89 and a maximum of 16.97, currently trading at 16.92.

On Tuesday afternoon, Cemex announced that Fitch Ratings upgraded the issuer’s long-term foreign and local currency risk ratings to ‘BBB-‘ from ‘BB+’; achieving investment-grade status.

Corporate News

Qualcomm rose over 5% after surpassing analysts’ estimates of $2.32 per share.

Novo Nordisk exceeded earnings estimates as demand for its weight loss medications continued to surge.

Shell outperformed due to higher refining margins and strong oil trading.