Leading Economic Indicator Points To Looming Recession

Home sales in March fell 21% year-over-year. The market is trapped by low inventory because of low mortgages.

No one wants to make a move.

Market

Prices as of 4 pm EST, 4/20/23

Macro

In sharp contrast with this week’s Empire State Manufacturing Index, the Philadelphia Fed’s gauge of regional business activity dropped more than expected in April.

• The index posted its eighth consecutive reading below zero—indicating a contraction—and its tenth in the past 11 months.

• Subindexes for new orders are shipments both improved from the previous month but remain in contraction.

• Prices paid by firms declined for the second straight month while prices received turned negative for the first time since May 2020.

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Weekly initial jobless claims rose by 5,000 to 245,000—the highest since November 2021—pointing to a modest softening in the labor market.

• It was the fifth time in 7 weeks that initial claims have been above 240,000.

• Continuing claims rose to 22% above their levels from a year ago, above the 20% threshold that has historically marked a recession.

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Sales of existing homes in the US fell more than expected in March, dropping 2.4%.

• It was the 13th decline in sales in the last 14 months.

• The median selling price for those homes fell by 0.9% from a year earlier to $375,000, marking the biggest drop since January 2012.

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Meanwhile, the Conference Board’s Leading Economic Indicator (LEI) continues to point to a recession ahead.

• The LEI dropped 1.2% in March to its lowest level since November 2020.

• On a YoY basis, the index fell 7.8%, a level not seen even during the recessions of the early 70s and early 80s.

@lizannsonders

Stocks

After marking down the price tag for some of its vehicles, Tesla (NASDAQ:TSLA) watched profits compress in Q1.

• Now, the company is reversing some of those cuts and increasing the price of its Model S and X cars.

• The models are still cheaper than they were at the end of the first quarter, however.

• Separately, Ford CEO Jim Farley likened Tesla’s price reduction strategy to that of Henry Ford’s for the Model T, saying the moves could start a price war in the EV market.

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BuzzFeed is shutting down its award-winning (wtf?) news division and slashing 15% of its workforce.

• The digital media group will instead focus on profitable parts of its operations like HuffPost.

• The company isn’t alone: Vice Media has been trying to unload Vice World News for months, while Insider, Vox Media, and Dow Jones have all laid off staff this year.

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Relative to the Nasdaq, stocks in the S&P 500 are seeing stronger short-term breadth.

• Close to 80% of the latter’s large caps are above their 20-day moving average as compared to 55% for the former.

• On the other hand—with the exception of staples—100-day moving average breadth for all sectors is well below levels seen in February.

@the_chart_life

Energy

Gaps were made to be filled.

• Oil prices are sitting just above the level they were at when OPEC+ shocked markets with surprise production cuts.

• Driving the losses are economic uncertainty and fears of a recession which would weigh on demand.

Bloomberg

Earnings

Here are some of yesterday’s highlights:

• American Express (NYSE:AXP): $2.40 EPS (vs. $2.66 expected), $14.28 billion in sales (vs. $13.98B expected).

• AT&T (NYSE:T): $0.60 EPS (vs. $0.59 expected), $30.14 billion in sales (vs. $30.27B expected).

• DR Horton (NYSE:DHI): $2.73 EPS (vs. $1.93 expected), $7.97 billion in sales (vs. $6.45B expected).

What we’re watching today:

• Procter & Gamble (NYSE:PG)

• SAP SE (NYSE:SAP)

• HCA Healthcare (NYSE:HCA)

• Schlumberger (NYSE:SLB)

• Freeport-McMoRan (NYSE:FCX)

• Regions Financial (NYSE:RF)

Top Headlines

• Loophole: The Fed is considering closing an exemption that allows some midsize banks to mask losses on securities they hold.

• Labor talk: Fewer and fewer companies are talking about labor shortages.

• Checkmarks: Twitter has stripped legacy accounts of their blue checkmark status.

• Friendly fire: A Russian fighter jet accidentally dropped a bomb on Belgorod–a Russian city.

• Starship: Minutes after liftoff, SpaceX’s Starship rocket exploded mid-flight due to an engine failure.

• AI race: Alphabet will try to gain ground on Microsoft and OpenAI by merging its DeepMind and Google Brain AI research units.

• US-China: Janet Yellen says any efforts to decouple the US economy from China would be “disastrous”.

• Hiring plans: Following its latest round of layoffs, Mark Zuckerberg says Meta will slow down hiring.

Crypto

Prices as of 4 pm EST, 4/21/23

• USDT: Tether (CRYPTO: USDT) increased its stablecoin market dominance by minting one billion USDT tokens on the Ethereum network last night.

• Offshoring: Gemini became the second major US crypto exchange (after Coinbase) to announce plans to expand abroad.

• MiCA: The EU Parliament voted yesterday to approve the long-awaited Markets in Crypto Assets Regulation.

• ETH supply: Ethereum’s (CRYPTO: ETH) supply of native coins has been reduced by 100,000 since The Merge.

• Web3 VC: Venture capital funding for web3 startups dropped 82% YoY to its lowest since Q4 2020.

Deals

• Battery tech: China’s U Power saw shares surge 620% in the biggest US IPO pop of the year.

• Fast food: Carlyle is looking for fresh backers for its investment in McDondald’s China operations.

• Infrastructure: Saudi Telecom will buy a portfolio of tower assets from United Group for $1.3 billion.

• MLB: The Oakland A’s plan to become the first MLB team to relocate since 2005 after acquiring land for a new stadium in Las Vegas

• Tokyo IPO: Rakuten Bank becomes Japan’s biggest IPO since 2018 after a 38% surge in its debut.

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