Happy Friday!
Stocks rally to all time highs on moderating consumer inflation and the hope of interest rate cuts. Credit card delinquencies on the rise – especially for younger borrowers. “Roaring Kitty” resurfaces with a “Meow.” Nimble, the border collie-papillon mix, is the nimblest in the land!
#1 – Weekly Market Recap – Moderating inflation and the hope of interest rate cuts pushed the three major stock indices into record territory this week:
- The Dow Jones reached 40,000 for the first time.
- The S&P 500 passed 5,300 for the first time.
- The Nasdaq Composite hit 16,742, an all-time high.
Through Thursday, the technology focused Nasdaq led the way up +2.2% for the week, while the S&P 500 rose +1.4% and the Dow Jones added +0.9%.
A torrid Wednesday rally moderated slightly on Thursday as investors took a breather from heavy stock buying; trading volume was down 5-10% versus the 30-day moving average.
Year-to-date, the S&P 500 has returned 11.7%, the NASDAQ has returned 10.6%, and the Dow Jones has returned 5.8%.
#2 – Uneven Inflation – April inflation data provided mixed signals for investors.
CPI, which measures consumer inflation, rose +0.3% in April and is up +3.4% for the year. The April CPI data was slightly below forecast estimates for +0.4%. The annual inflation rate of over 3% appears anchored well above the Federal Reserve’s 2% – 2.5% target range.
PPI, which measures producer inflation, rose +0.5% in April and is up 2.2% for the year. The producer inflation was well above forecast estimates for a +0.2% increase.
Combined, April’s consumer and producer inflation data show that inflation is down significantly from the pandemic level peaks, but consumer inflation remains stubbornly above the Federal Reserve’s 2% target.
While producer inflation has been benign for the last year, recent readings show that it is accelerating, with April’s 2.2% level the highest over the past 12 months.
The future direction of CPI and PPI data in the coming months will have a significant impact on when the Federal Reserve can begin cutting interest rates.
#3 – Debt Dilemma – Delinquency rates for US consumers continued to climb in the first quarter of 2024, with American households now delinquent on $324 billion of outstanding debt.
As seen in the chart below, delinquency rates increased the fastest in credit card and auto debt.
Source: NY Fed (5/16/2024)
This is not a surprise with the average credit card interest rate increasing from 16% in 2021 to over 22% currently.
While the increases in credit card and auto delinquency points toward strapped consumers, it is important to note that mortgage delinquency rates remain below pre-2020 levels.
Mortgage debt, which often has a fixed interest rate, accounts for 70% of all US household debt. This is good news for borrowers as many homeowners took advantage of historically low rates during the pandemic to lock in rates.
Higher interest rates are having the greatest impact on younger borrowers as they are often more dependent on revolving credit lines. As shown in the chart below, credit card delinquencies for borrowers in the 18-39 age group have doubled over the past 2 years.
Source: NY Fed (5/16/2024)
Source: New York Fed
#4 – “Roaring Kitty” or “Meowing Kitten?” – A series of cryptic messages posted by Keith Gill a/k/a “Roaring Kitty” Sunday on X (formerly Twitter) were the first posts from the meme rally central figure in three years.
Investors appeared to interpret the “Roaring Kitty” posts as a buy signal and drove the price of GameStop (GME) and AMC Entertainment (AMC) stocks up +179% and +135% respectively to start the week.
Trading was halted in GME multiple times on Monday. According to JP Morgan, GME and AMC were the most traded stocks by retail investors on Monday.
During the pandemic in 2021, Gill was the central figure in the “meme stock” frenzy. His “Roaring Kitty” Reddit and social media posts helped attract a flood of retail investment into GameStop, AMC and other stocks. The frenetic buying drove the stock prices higher, crippling hedge funds who had “shorted” the stocks.
When “shorting a stock”, an investor borrows stock with the hope that they can buy it back at a future lower price and pocket the difference. However, if the price of the “shorted” stock rises instead of falls, it can lead to significant losses for the “short” investor. This is what happened to some of the hedge funds that “shorted” meme stocks during the pandemic.
By Wednesday’s market close, however, the “Roaring Kitty” sounded more like a “Meowing Kitten” as GameStop and AMC share prices had fallen dramatically from the two-day rally.
Gill did not respond to Reuters request for comment on whether he would be resuming posting about his trades on social media.
Source: Reuters
#5 – Nimble is Number One – Nimble, the 6-year-old border collie-papillon mix, lived up to her name by becoming the first mixed-breed dog to win the Westminster Kennel Club (WKC) agility title.
Nimble beat 350 competitors to take home the top prize. Despite being in the non-purebred category, which the WKC refers to as “All American Dogs,” her pedigree is distinguished. Border collies have won 8 of the last 11 agility titles and papillons are also historically top contenders.
Nimble is also the first dog from the 12-inch height division to win the crown since the WKC first allowed mixed breeds to compete in 2014.
Nimble’s owner and handler, Cynthia Hornor, has been an agility trainer for more than 20 years and has experience winning. In 2023, she won the Masters Agility title with her other dog Truant, a border collie.
According to Horner, Nimble loves to play and eat the steak that she receives as a reward. On Monday, the small but mighty pointy-eared black and white pup sped through a series of jumps, hoops, seesaws and ladders with hardly any direction needed from Horner.
Source: Fox Sports
“Agility is the equalizer,” Horner said. “Mixed-breed dogs can be just as fast as purebred dogs.” The one lesson she wants dog owners to take away from Nimble’s victory, is that agility is a great way for owners to bond with their dogs.
Source: NPR
Have a great weekend!
Denver & the DSGCA Team