Pictet North America Advisors SA

2024 Weekly Update

On track

Market update, Macroeconomy, Highlights, What to watch from the Investment team of Pictet North America Advisors.

The content of this document is for information purposes only and is not to be used or considered to be an investment recommendation, or an offer or solicitation to buy, sell or subscribe to any securities or other financial instruments. It does not take into consideration the specific investment objectives, financial and fiscal situation or particular needs of the addressee. It reflects PNAA’s beliefs based on its own views of the direction of the global macroeconomic market, its investment process and other relevant factors.

Market update

The S&P 500 closed the week at 5,127.79, +0.55% higher. The Dow Jones closed at 38,675.68, +1.14%, with the Nasdaq higher by +1.43%. The volatility index VIX closed the week at 13.49 down from 15.03. The Euro Stoxx 600 rose +0.16%.

The 10-year UST closed at 4.51% down from 4.66% a week before. The yield curve is inverted with the yield spread between the 3-month and 10-year UST at -90bps. US Corporate Bond spreads: Investment Grade tightened 3bps at 155bps and High Yield tightened 11bps at 327bps. German 10-year Bunds yield closed at +2.50% down from +2.58% a week before. In Europe, Corporate Investment Grade spreads widened 1bp at 124bps and High Yield spreads widened 7bps to 353bps.

The US Dollar Index (DXY) depreciated -0.86% last week and closed at 105.03. The Euro closed at 1.0761 (+0.64%); the Yen appreciated +3.33%, closing at 153.05 and the Swiss Franc appreciated +0.96%, closing at 0.9054. Gold closed at $2,301.74 depreciating -1.55%. Oil was lower, Brent closed at $82.96 (-7.31%) and WTI at $78.11 (-6.85%).


Fed meeting

The FOMC kept rates unchanged (at 5.25-5.50%) and maintained its implicit easing bias but made a few hawkish changes compared to the last meeting. The press release added that “in recent months, there has been a lack of further progress toward the Committee’s 2% inflation objective”, with Powell emphasizing that the data “so far have not given us this greater confidence” on inflation normalization. Powell’s prepared remarks removed the wording that dialing back policy restraint was likely “this year”, with a shift away from any calendar-based guidance also evident during the Q&A. That said, the FOMC was focused on holding rates steady for longer as needed, rather than considering rates hike. Powell noted that renewed hikes were “unlikely” and would require “persuasive evidence that our policy stance is not sufficiently restrictive”. On the balance sheet side, the Fed announced a slowing in the pace of QT (Quantitative Tightening). Specifically, the monthly cap on Treasuries runoff will decline from $60bn to $25bn a month starting in June, with the MBS cap kept at $35bn. The decline in the Treasuries cap was on the steeper end of expectations, which appeared to favor a $30bn pace after the minutes of the March meeting supported reducing “runoff by roughly half”.

Jobs report

The US economy added 175k jobs according to the headline Establishment survey, below the 240k forecast, below the 12-month average of 242k as well, and the lowest figure since Oct 2023’s +165k. Establishment survey revisions were net negative with employment in Feb. and Mar. combined at 22k lower than previously reported. The Household survey showed even softer job creation as the number of employed people rose just 25k m-o-m. The soft Household number pushed the unemployment rate up to 3.9% (above the 3.8% forecast and higher than Mar’s 3.8% figure). Average hourly earnings were soft, coming in +0.2% m-o-m (vs. expectations at +0.3%) and +3.9% y-o-y (below the +4% forecast and down from +4.1% in Mar.). The workweek shrank a tiny bit to 34.3 hours (down from 34.4 hours in Mar. and below the 34.4 forecast). Average weekly earnings fell slightly m-o-m as the small uptick in hourly wages was offset by the smaller workweek.

European GDP and PMI

Euro Area GDP growth came in at +0.3% in Q1 (vs. +0.1% expected). The flash CPI release was in line with expectations at +2.4%, even if core CPI was a touch higher than expected at +2.7% (vs. +2.6% expected). That is the lowest core CPI in over two years, and the GDP growth was the strongest since Q3 2022. German GDP was up by +0.2% in Q1 (vs. +0.1% expected). HCOB's final euro zone manufacturing PMI fell to 45.7 in April from 46.1 in Mar. It was just ahead of a 45.6 preliminary estimate. Manufacturing activity weakened despite factories cutting prices, pushing firms to reduce headcount again. Regionally it was a mixed bag, with the situation deteriorating in France and Italy while in Germany the sector moved closer to expanding. Spain was an outlier, activity there expanded at its fastest pace in almost two years thanks to an uplift in demand. In the UK, the final manufacturing PMI for April was revised up four-tenths from the flash release to 49.1.


The US manufacturing ISM fell 1.1 points m-o-m to 49.2, dropping into contractionary territory vs. the 50 estimate. New orders, new export orders and production slumped. While the growth components softened, employment ticked up 1.2pts (still below 50 though at 48.6) while prices surged 5.1pts (to 60.9). Later in the week, US services ISM was similar in that growth components deteriorated while inflation surged. The overall index fell 2pts m-o-m to 49.4, falling short of the 52 forecast. This is the first time the services ISM has been below 50 since Dec. 2022. Business activity/production plunged 6.5pts (to 50.9) while new orders sank 2.2pts (to 52.2), employment dropped 2.6pts (to 45.9), and new export orders sank 4.8pts (to 47.9). The prices index surged 5.8pts to 59.2.



The Q1 earnings season is well underway in the US with almost 400 of S&P500 members having already reported. Around 79% of companies have exceeded EPS expectations, surprising positively by 9%. On the revenue side, 56% of companies have beat sales expectations. Top line growth is coming in at 4% year on year, surprising on the upside by 1%. Results have been particularly strong for tech mega-caps. Last week, Apple reported upside on EPS ($1.53 vs. $1.50) and sales ($90.75bn vs. $90.3bn) and surprised investors by announcing an additional $100bn in share repurchases and a 4% dividend hike. Amazon continues to outperform expectations on margins. AWS operating margin came in at an impressive 37.6% while North American retail operating margin rose to 5.8% (vs. 5% expected). Sales rose 13% to $143.3bn (vs. estimates of $142.6bn) and operating income was very strong ($15.3bn vs $10.9bn). Communication Services and Discretionary sectors also posted strong results, recording double-digit EPS growth. Commodity and Healthcare sectors are lagging, down on a y-o-y basis. In Europe, 56% of the 247 Stoxx600 companies that have reported have beaten expectations. EPS growth is currently standing at -10% year on year, beating expectations by 4%. If we exclude Energy, EPS growth comes in slightly higher at -3%. Commodities, Industrials, Discretionary and Tech are all down double-digit while Staples, Healthcare, Communication Services and Utilities have recorded robust earnings growth. On the topline, 45% of companies are beating sales estimates. Revenue growth stands at -4% y-o-y.

On rates

10-year Treasury yields saw their largest weekly decline of the year so far, falling 15.5bps to 4.51%. This followed Powell’s less hawkish than feared comments coupled with a weaker labor report which reignited hopes of a soft landing for the US economy. Investors raised their expectations of rate cuts for the year. 45bps worth of cuts are now priced in and the odds of a cut by the 7/31 and 9/18 meeting climbed to 40% and 90% respectively. These expectations were given further fuel on Friday after the April ISM services PMI came in at 49.4 (vs 52 expected), its lowest level since Dec. 2022. It was a similar story in Europe where markets are getting increasingly confident the ECB will cut rates at their June meeting. Late on Friday, investors were pricing in a 95% chance of a rate cut in June, up from 88% at the beginning of the week. That lent support to European fixed income, as 10yr German bund yields fell -8.0bps. 10yr gilts fell -10.2bps.

What to watch

  • Monday: China Caixin PMI (Apr.)
  • Tuesday: Germany Fact. Orders (Mar.); Eurozone Retail Sales (Mar.); Switz. Unempl. Rate (Apr.), Currency Res. (Apr.); Res. Bank of Australia
  • Wednesday: Germany Industrial Production (Mar.)
  • Thursday: China Trade Balance (Apr.); Bank of England
  • Friday: UK GDP (1Q, prel.), Industrial and Manufacturing Production (Mar.); US University of Michigan Sentiment (May, prel.)