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MAY 1, 2024

STEADY MODE BUT UNKNOWN FUTURE

The U.S. central bank will release a statement today at 1:00 PM CST, following their two-day policy meeting to address recent disappointing inflation readings and the potential for interest rate cuts this year. Let’s highlight that before cutting rates, the Federal Reserve wants to see further progress in the economy, particularly in labor market conditions and inflation rates, however, although the Fed had made progress in lowering inflation back to its 2% target, recent data has indicated a stall in this progress, prompting caution in implementing rate cuts. As a result, although investors are almost certain that the interest rate will remain unchanged, there is uncertainty about future changes. In fact, many are adjusting their expectations, with the likelihood of no rate cuts this year increasing significantly.

WITHDRAWALS DUE TO UNCERTAINTY

Bitcoin saw a 6% decrease earlier this morning as investors withdrew funds from cryptocurrencies before the Federal Reserve’s interest rate decision. As stated before, there is speculation that the Federal Reserve will maintain interest rates, and as investors question the possibility of rate cuts happening this year, many are uncertain of the impact of a hawkish approach from the Fed, will have on assets like cryptocurrencies. As a result, many investors have withdrawn their funds from the crypto market, with both major and smaller cryptos suffering losses. Bitcoin dropped nearly 16% in April as investors took profits from its record-breaking rally, and it is 22% below its March peak. Nevertheless, despite this it is worth remarking that Bitcoin remains 35% higher for the year and has doubled in value compared to last year. Moreover, as of 8:00 AM CST, Bitcoin is trading just above the $58,000 mark.

UPWARD MOMENTUM CONTINUES

According to the latest ADP report, private payrolls in April showed a stronger-than-expected increase of 192,000, reflecting broad-based hiring across different sectors except for the information industry. Notable job gains were seen in leisure and hospitality, construction, trade, transportation, education, and health services, with companies employing 500 or more workers leading the way with 98,000 new jobs. This growth in employment coincides with a multiyear low in worker pay, up 5% from a year ago, amid concerns about unexpected inflation rates. It is worth noting that the ADP release precedes the official Bureau of Labor Statistics report, with recent trends showing ADP figures slightly below government data, however, closer alignment was observed in March. Moreover, the upcoming nonfarm payrolls report, due on Friday, is expected to reveal total job growth of 204,000 for April, following a robust increase of 303,000 in March.

ACCELERATING GROWTH

In the first quarter of the year, Amazon exceeded expectations with strong financial performance. Earnings per share stood at 98 cents, surpassing projections, while revenue reached $143.3 billion, higher than anticipated. Operating income saw a remarkable surge of over 200% to $15.3 billion, contributing to a more than tripling of net income to $10.4 billion. Amazon Web Services performed exceptionally well, generating $25 billion in revenue, and the advertising segment also showed robust growth, bringing in $11.8 billion. Sales overall increased by 13% year-over-year. Looking ahead, Amazon expects continued profitability in the second quarter, with projected operating income of $10-14 billion and revenue growth of 7-11%. The company’s cost-cutting strategies and focus on efficiency are driving earnings growth, with AWS sales seeing a 17% acceleration to $25 billion. The advertising unit enjoyed a 24% surge in sales, while revenue from third-party seller services grew by 16% to $34.5 billion, reinforcing Amazon’s solid financial position with cash and equivalents totaling $73.9 billion.

INTERNATIONAL NEWS

The eurozone economy is experiencing positive developments as it emerges from recession with faster-than-expected growth in its top four economies. The first quarter of the year saw a 0.3% increase in gross domestic product, the strongest in 1.5 years, while consumer prices also rose in line with expectations. Factors like high inflation, rising interest rates, and weak global demand previously hindered output, but the situation is now improving, bolstered by recovery in key countries like Germany. The European Central Bank’s upcoming monetary easing is expected to further support this revival, however, it is worth noting that Despite progress, concerns remain, as seen in a recent decline in sentiment and persistent inflation worries. Nonetheless, core pressures have eased, indicating a positive outlook for price growth in the future, thus, the ECB’s Governing Council is optimistic about meeting its goals, possibly considering a rate cut in June.

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