US economic growth slowed in April, according to the flash PMIs from S&P Global. The manufacturing sector contracted for the first time this year, following three consecutive quarters of expansion as consumers and businesses balked at lofty prices while feeling satisfied with their current inventories. Meanwhile, demand for services was the weakest of the year with firms perceiving that elevated interest rates and inflationary pressures pushed customers away. Both manufacturers and servicers reduced headcounts in efforts to preserve margins against the backdrop of questionable revenue growth. But while input costs rose sharply, price increases for customers slowed across both sectors, opening the door to potential disinflation in coming months if demand continues to slow.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n April\u2019s Manufacturing PMI of 49.9 for this month was a whisker away from the expansion-contraction threshold of 50 and much worse than the consensus estimate of 52 as well as March\u2019s 51.9. The Services PMI remained in expansionary territory, coming in at 50.9, but also beneath the median projection of 52 and March\u2019s 51.7. Slowing demand and labor force softening is certainly needed to slow inflationary pressures. A continuation of these trends will help lower interest rates and keep the economic expansion going amidst decelerating price pressures.<\/p>\n\n\n\n Across the Atlantic, eurozone economic growth accelerated sharply as the region gears up for the beginning of the European Central Bank\u2019s easing cycle. Most nations performed well, but the bifurcation across manufacturing and services remained. The Services PMI accelerated strongly to 52.9, much higher than the 51.8 forecast and March\u2019s 51.5. Headcounts, output and prices rose strongly, as loftier wage bills, robust demand and geopolitical pressures pushed up figures. Manufacturing remained in the tombs though, achieving a miserable score of 45.6, worse than the anticipated 46.5 and the 46.1 from the previous period. Supply chains did improve significantly though, as Red Sea disruptions appear increasingly tempered. Optimism was reported by executives in both sectors as firms look forward to rate cuts this June. The hope, however, is that this reacceleration in economic growth occurs alongside sustainable price increases, a challenging needle to thread. <\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Homebuyers jumped to the new home market last month, with the pace of transactions rising at the fastest clip since last September. New Home Sales rose 8.8% month over month (m\/m) to 693,000 seasonally adjusted annualized units in March, better than the 668,000 expected and the 637,000 from February. Transactions performed well in all regions with the Northeast, West, South and Midwest experiencing m\/m sales increases of 27.8%, 8.6%, 7.7% and 5.3%. Prices also jumped to the highest level since last August, with the median cost of $430,700 in March increasing from $406,500 m\/m. Inventories declined to 8.3 months at the current pace of sales, a sharp m\/m decline from February\u2019s 8.8 months. Bifurcated conditions between new and existing homes may begin to align this year as prospective existing home sellers compete with homebuilders for transactions, especially as the former cohort grows increasingly impatient awaiting lighter mortgage rates.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Shipping volumes were weak in the first quarter but are improving, and separately, consumers are splurging on new pickup trucks and sport utility vehicles (SUVs). In other sectors, consumers are pushing back on higher beverage and snack prices, while strong air travel and issues at Boeing are supporting demand for after-market aviation products. Those are a few themes from the following earnings releases:<\/p>\n\n\n\n Risk-on sentiments are buoyant following today\u2019s cooler-than-expected flash PMIs, which may pave the way for disinflation in the coming months. Stocks are up while the dollar and yields are submerging, as traders put July back on the table for the Fed\u2019s first rate cut, but odds continue to favor September as the start of the easing cycle. All major US equity indices are higher with the Russell 2000, Nasdaq Composite, S&P 500 and Dow Jones Industrial indices up 1.5%, 1.3%, 1% and 0.5%. Sectoral breadth is positive with 10 out of 13 sectors up on the session. Leading the charge higher are communication services, technology and industrials; they\u2019re up 1.6%, 1.2% and 1.2%. Meanwhile, materials, energy and consumer staples are lower by 0.8%, 0.2% and 0.1%. Yields are declining, with the 2- and 10-year Treasury maturities trading at 4.94% and 4.59%, 4 and 2 basis points (bps) lighter on the session. Lighter yields and softer inflation expectations are also weighing on the dollar, with its index down 35 bps to 105.78. The greenback is losing ground relative to most of its major developed market counterparts including the euro, pound sterling, yen and Aussie and Canadian dollars. It is gaining versus the yuan though. WTI Crude oil is up 0.9%, or $0.72, to $82.80, as rising probabilities of rate cuts stateside and in the eurozone propel the demand outlook even as supply prospects have improved on the back of simmering geopolitical tensions.<\/p>\n\n\n\n As the year has progressed, inflation data has continued to point to the Fed delaying and reducing the number of rate cuts it would enact this year. While last week\u2019s market volatility was driven, in part, by investors repricing equities based on the higher for longer outlook, today\u2019s data is helping alleviate fears of the central bank staying restrictive for too long. On one hand, both manufacturing and services PMIs show that they are reducing headcounts, an encouraging development that could help ease wage pressures that would otherwise cause businesses to increase their prices. Additionally, overall weakness in both the manufacturing and services PMI point to slowing economic growth and consumers balking at higher prices. While this week\u2019s GDP and PCE reports will shed light on what\u2019s been a powerful first quarter, the second quarter\u2019s momentum will be driven by the sustainability of consumer spending momentum. Throughout this cycle, we\u2019ve seen consumer spending freeze in certain months, only to reaccelerate later. Consumers may be erratic, but the trend remains positive, especially as the propensity to save has disappeared, providing corporates with incremental revenue growth.<\/p>\n\n\n\n![\"PMIs](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/04\/Picture1-22.png\")
<\/figure>\n\n\n\nEurozone Outlook Brightens<\/strong><\/h2>\n\n\n\n
![\"euro](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/04\/Picture2-11.png\")
<\/figure>\n\n\n\nHomebuyers Flock to New Construction<\/strong><\/h2>\n\n\n\n
![\"the](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/04\/Picture3-4.png\")
<\/figure>\n\n\n\nPackage Delivery Demand Rebounds While GM Posts Strong Sales<\/strong><\/h2>\n\n\n\n
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Investors Embrace Risk<\/strong><\/h2>\n\n\n\n
A More Favorable Outlook for Disinflation<\/strong><\/h2>\n\n\n\n