Bull market or not? | 05 May 2023

#SP500:

PCE is a measure of inflation that tracks the changes in the prices of goods and services purchased by consumers throughout the economy. The headline PCE deflator decelerated to 4.2% year over year, down from last month’s upwardly revised year-over-year rate of 5.1%. Month over month inflation was the softest since July 2022. While the Federal Open Market Committee is still expected to implement a 25-basis point hike at next week’s May meeting, the situation shown in the chart below, where the fed funds rate is above both headline and core PCE, adds credence to the view that May’s likely hike could be the final flourish at the end of the Fed’s current rate hiking cycle. The widening of the difference between the fed funds rate and inflation will be a key topic for the remainder of 2023 as we access the potential for, and timing of, rate cuts.

Trading recommendation: buy 4136 and take profit 4244.

XAUUSD:

Gold bounced back on a dip in yields and renewed concerns over the U.S. banking turmoil, putting the safe haven on course for its second monthly rise even as steady U.S. inflation reinforced bets for an interest rate hike next week. Benchmark yields fell after data showed the pace of overall inflation slowed in March and consumer spending was steady. The Federal Reserve issued a detailed and scathing assessment of its failure to identify problems and push for fixes at Silicon Valley Bank before the lender's collapse, promising tougher supervision and stricter rules.

Trading recommendation: buy 1970 and take profit 2010.

#Exxon:

Exxon Mobil Corporation announced first-quarter 2023 earnings of $11.4 billion, or $2.79 per share assuming dilution. “Our people's hard work to execute on our strategic priorities delivered a record first quarter following a record year,” said Darren Woods, chairman and chief executive officer. Cash flow from operations totaled $16.3 billion, and free cash flow was $11.4 billion for the quarter. The company's debt-to-capital ratio remained at 17% and the net-debt-to-capital ratio declined to about 4%, reflecting a period-end cash balance of $32.7 billion. The strong balance sheet and cash position are especially valuable in the current high interest rate environment.

Trading recommendation: buy 116.00 and take profit 119.74.