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FEBRUARY 28, 2024

SOARING SURGE

Bitcoin has experienced a significant increase, surpassing $60,000 and coming close to its all-time high. The digital asset’s price has risen over 15% this week and 40% so far this year, and the surge is largely due to enthusiasm sparked by newly introduced bitcoin exchange-traded funds. Bitcoin ETFs have seen over $6 billion in net flows, and as of 8:00 AM CST, Bitcoin was trading at $60,536.00 – its highest point since November 2021. Moreover, the excitement has also resulted in a rise in other cryptocurrencies like Ether, with significant upticks in investor activity seen across various sectors, including Bitcoin mining, holding companies, trading, and derivative investment. Furthermore, there has also been a boom in the options and futures markets, with both markets experiencing a significant surge in regards of confidence in Bitcoin’s future growth. Specifically, the futures market has hit a record high, with $24 billion in contracts, indicating substantial interest in the potential future value of Bitcoin.

GROWTH DECELERATION

The Bureau of Economic Analysis released the latest data showing that the real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the fourth quarter of 2023, marking a slowdown from the 4.9 percent growth in the previous quarter. This updated estimate is based on more complete source data than the previous “advance” estimate, and reflects a downward revision to private inventory investment, along with upward revisions to state and local government spending and consumer spending. The increase in real GDP was driven by rises in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, and residential fixed investment, although this growth was partially offset by a decrease in private inventory investment. On the other hand, there was a deceleration in imports, which are subtracted in the GDP calculation. When compared to the third quarter of 2023, the deceleration in real GDP in the fourth quarter primarily reflects downturns in private inventory investment, federal government spending, residential fixed investment, and consumer spending, as well as decelerated imports.

SENTIMENT SHIFT

The market sentiment among bond traders has significantly shifted, with updated expectations pointing to a potential 0.75% decrease in interest rate cuts by the Federal Reserve this year. This adjustment mirrors the evolving perspective of Federal Reserve policymakers since December. While initial forecasts anticipated rate cuts, there is now growing investor discourse about the potential for the Federal Reserve to raise interest rates. These discussions have instigated movements in the U.S. dollar, which has strengthened due to robust economic data and increased investments in American assets. Additionally, the upcoming February employment report is poised to have a significant impact on shaping market expectations regarding anticipated interest rate cuts by the Federal Reserve for the year, while also influencing the trajectory of the dollar in the months ahead.

SLOWDOWN IN DEMAND

According to the Mortgage Bankers Association, there was a 5.6% decrease in mortgage application volume last week, which indicates a slowdown in homeowner and homebuyer demand. This decrease was due to a notable increase in mortgage rates as the 30-year fixed-rate mortgages, the average contract interest rate, rose to 7.04% from 7.06% with points increasing to 0.67 from 0.66 for loans with a 20% down payment. This reflects a prominent quarter percentage point increase compared to a year ago. Moreover, as a result of such increase, there was a 7% drop in applications to refinance home loans last week, along with a 5% decrease in applications to purchase homes compared to the previous week and a 12% reduction from the same period one year ago. The combination of these observations indicates the impact of higher mortgage rates affecting both buyers and existing homeowners and is expected to continue influencing the real estate market in the near future.

EARNINGS OVER EXPECTATIONS

Off-price retailer TJX Cos. reported a 13% surge in holiday sales as shoppers sought deals. Its earnings per share were $1.22, beating expectations of $1.12, while revenue stood at $16.41 billion, surpassing the anticipated $16.21 billion. The net income was $1.4 billion, or $1.22 per share, up from $1.04 billion, or 89 cents per share, the previous year. Sales rose to $16.41 billion, a 13% increase from the previous year. Consequently, TJX’s stock climbed over 7% year to date, reflecting its outperformance. Moreover, the company provided optimistic guidance in anticipation of the holiday season, contrasting with other retailers’ caution. Nontheless, despite positive results TJX’s quarterly guidance was below Wall Street’s forecast, indicating potential concerns about its sustained growth and demand, particularly as it faces increased inventory and clearance issues.

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