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MAY 3, 2024

SLOWER THAN EXPEXTED

In April, the U.S. economy added 175,000 jobs, falling short of the expected 240,000, resulting in a rise in the unemployment rate to 3.9%. Despite the lower job growth, average hourly earnings saw a modest increase. Sectors such as health care, social assistance, transportation, and retail experienced notable job gains, while construction added 9,000 positions. The government sector, however, only saw an increase of 8,000 jobs after months of solid gains. The broader measure of unemployment, which includes discouraged workers and part-time employees seeking full-time opportunities, also edged up to 7.4%, the highest since November 2021. The report also highlighted a stagnant labor force participation rate of 62.7%. These numbers suggest a potential shift in the Federal Reserve’s stance on interest rates, as the data deviates from the robust job growth seen in recent months, influencing the Fed’s decision-making regarding monetary policy adjustments.

STELLAR QUARTER

Coinbase (COIN) has reported a stellar first quarter for this year, with a net income of $1.2 billion and earnings per share of $4.40, thanks to favorable crypto market conditions. In addition, it has been reported that for this first quarter, Bitcoin saw a 34% increase, and the CoinDesk 20 Index (CD20) rose by 17%. Consequently, broker JMP reiterated its positive rating and $320 price target, while Canaccord Genuity raised its target to $280 from $240, and KBW increased theirs to $240 from $230, maintaining their market outlook ratings. Additionally, the Coinbase saw revenue growth from USDC stablecoin activities, but it is worth noting that KBW expressed caution about future balance fluctuations as market conditions evolve. Moreover, analysts anticipate continued growth for Coinbase, which will likely be driven by innovations such as Coinbase Prime and international expansion, the potential of Coinbase’s smart wallet and layer-2 blockchain improvements.

BULLISH GROWTH

Block recently raised its full-year earnings forecast and announced intentions to increase its Bitcoin holdings, resulting in a 7.9% surge in its stock price. With the cryptocurrency gaining traction and multiple Bitcoin exchange-traded funds receiving approval from the SEC in January, Block is capitalizing on this growing trend. The company’s strong quarter, marked by a 19% increase in total revenue to $5.96 billion, reflects the positive outlook in the payments sector. Likewise, PayPal has also revised its profit forecast, indicating robust consumer spending. Despite Block’s 9.1% decrease in stock value this year, compared to PayPal’s 9% increase, the firm’s adjusted earnings per share of 85 cents in the first quarter surpassed analysts’ expectations of 72 cents per share. This suggests that despite market fluctuations, Block remains competitive and is strategically positioning itself for future growth fueled by the expanding popularity of cryptocurrency and overall consumer spending resilience.

RECORD EARNINGS

In the second quarter of this year, Apple has surprised investors by surpassing profit expectations and experiencing a 6% increase in shares, as although there was a decline in iPhone sales revenue in China, which dropped by 8% to $16.37 billion – outperforming analyst forecasts of $15.87 billion, the company still managef to report earnings per share of $1.53 on a revenue of $90.8 billion. In addition, Apple has achieved a record-high services revenue of $23.87 billion, and announced a $110 billion increase in share repurchases and a higher dividend of $0.25 per share. Moreover, Chief Executive Officer Tim Cook addressed concerns about Apple’s performance in China, noting that iPhone revenue in mainland China grew on a reported basis despite adjustments related to Covid supply chain disruptions. Cook emphasized Apple’s long-term optimism about the Chinese market, which still accounts for 18% of the company’s net sales.

RATES CONTINUE RISING

Mortgage rates climbed this week, hitting an average of 7.39%, marking an increase compared to the start of the year. The average monthly mortgage payment stands at $2,175, representing 27% of the median family income of $96,300 reported for 2023. The Mortgage Bankers Association noted a 2.3% decrease in loan applications this week, compounded by elevated home prices and limited inventory in several markets, in spite of a slight uptick in supply reported by the National Association of Realtors in March. It is worth noting that as a rate cut may not be imminent until there is more confidence in inflation stabilizing at 2%, there are concerns that mortgage rates may remain high for the foreseeable future.

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