Last week, there were longest large corporate earnings reports, GDP data and economic information such as inflation indicators that the Federal Reserve paid attention to, investors faced a massive influx of information and the need to constantly reprice their assets, and the market also showed large fluctuations, and the overall N-shaped trend finally closed higher, especially led by technology stocks (Microsoft, Google's good earnings reports), the stock market has recovered half of the falls in April. After fall 5.4% last week, the Nasdaq 100 Rebound 4% this week, the S&P small-cap Russell 2000 both pump more than 2%, and only the Dow Jones pump less than 1%

We find that the main narrative of the market has not fundamentally changed – the pace of economic rise has slowed slightly, inflationary pressures are high, and geopolitical tensions have persisted, Intrerest Rate rise slightly. But

• Job market data continues to be strong
• The current market environment is in the process of reflation, not recession
• There is still some foundation for the recovery of the global manufacturing industry
• Personal consumption expenditures are still rising at a relatively healthy rate of 2.5% in just-released GDP data,
• Corporate equipment spending increased for the first time in nearly a year, with residential investment growing at the fastest pace in three years long

Therefore, the overall environment is still favorable for risk asset investment in the medium term.

Chart: All S&P zones closed pumped last week

The Big Seven's profit is expected to rise 47% year-over-year in the first quarter, easily outpacing the S&P 500's expected earnings rising of 2%. Three of the four companies that reported their results last week traded on pump (TSL, Alphabet, Microsoft), with Alphabet outperforming and announcing its first dividend. But Meta's shares, which had been a strong performer, fallen as the company unveiled lower-than-expected revenue forecasts while targeting higher capex to support artificial intelligence.

As can be seen from Meta's movements, investors are more focused on Big Tech's future investment and spending plans, rather than just their current earnings. Meta announced that it would increase investment in AI infrastructure by up to $10 billion this year, and such a large spending frightened investors and caused the stock price to plummet by 15% at one point.

Meta, Microsoft, TSL and Google combined had cash balances of $275 billion at the end of the first quarter. Investors will be happy if companies use their huge cash to make strategic acquisitions and get immediate returns. They don't want to see companies spend a lot of money on projects that don't know when they're going to be profitable. It feels like investors have limited patience with highly valued tech stocks right now, and they expect quick returns.

In one episode, ByteDance sources reported that if it eventually loses the lawsuit, the company would prefer to shut down the entire software in the United States. On the one hand, TikTok is still losing money for bytes, accounting for a small proportion of revenue, and its closure has little impact on the company's performance. On the other hand, the underlying algorithm in the APP is a trade secret of bytes and cannot be sold. If TikTok is finally shut down, the biggest beneficiary will definitely be Meta, but such news has not prevented Meta from big dump after hours, but if it happens, we are likely to see Meta jump pump.

China's stock market has become a sweet spot

Recently, overseas investment banks such as Da Mo, UBS, and Goldman Sachs have upgraded China's stock market ratings, and policymakers have suggested that PBoC may gradually increase its active trading in the secondary market of debt, which may enhance market liquidity and boost investor sentiment.

Northbound net inflows hit an all-time high last week, with the CSI 300 Index pump 1.2% above and MXCN (MSCI China Concept Index) and the Hang Seng Index pump 8.0% and 8.8% respectively, the best weekly return since December 2022, led by tech pump zone (+13.4%). With the continuous implementation of domestic economic rise policies, the profitability level of the numerator and the Liquidity factor of the denominator that affect the pricing of the A-share market are expected to be marginally improved, and the net inflow of foreign capital may further increase.

Another positive sign is the real estate market, such as the hot sales of luxury homes in Shanghai, which has driven the new home price index to pump, and the Shenzhen property market has also shown signs of recovery, with a significant increase in the number of second-hand housing transactions. John Lam, the first analyst to give a "sell" rating to China Evergrande in early 2021, said that after the correction, China's real estate industry is preparing for a slow recovery, and it is expected that China's real estate industry sales and prices will not pump this year, but the decline will be moderated. He believes that domestic residential sales by area could fall by 7% this year, down from the record 27% fall in 2022. Housing starts are likely to fall by 7%, narrowing from the 39% decline in 2022. Once house prices stabilize, pent-up demand will return, as the downward falling cycle of property prices over the past three years has caused people to postpone purchases.

In terms of Intrerest rates, the 10-year Treasury Intrerest Rate closed at 4.66% last week, gradually approaching 5%, and the 2-year Treasury Intrerest Rate closed at 5%, with the market absorbing a total of $183 billion in new Treasuries this week. The demand for 2-year government issuance is strong, and 5-year and 7-year government bonds are not bad.

High Intrerest rates are usually not conducive to the strength of the stock market:

Oil Rebound last week, pump 1.92% above the previous week. WTI crude settled at $83.64, the dollar was largely flat and DXY settled at 106.09. Gold falls 2% to settle at $2,337 as fears of an escalating conflict in the Middle East subsided. The Industrial Metals Index fall slightly 1.2%.

Crypto Assets lack new catalysts

Favorable macro market sentiment Rebound failed to drive Crypto Assets due to its own lack of new catalysts, with BTC Spot ETF net outflows for the third consecutive week (-328 million) and IBIT having zero inflows for three consecutive trading days, the first time since its inception.

Previously, after the conflict between Iran and Israel improved + Bitcoin was successfully Halving, the encryption market recovered, and BTC once rose above $67,000. With Hong Kong's first Spot ETH of ETF set to hit on Tuesday, ETH saw a 7%+ pump over the weekend. In addition, Ethereum development company Consensys filed a lawsuit against the SEC on the grounds of regulatory overreach, in response to the Wells notice received on April 10 (indicating that the SEC is working to file a case), and since it is not uncommon for encryption companies to sue regulatory wins, this is also a hedge against regulatory pressure for Ethereum.

After the downsizing, the BTC network Computing Power maintained a high level and did not decrease significantly, but Mining Difficulty rise:

Trump is more closely tied to loose monetary policy

Politically, the Wall Street Journal published a blockbuster article about the Trump team's plot to manipulate the Fed after taking office, and their proposed plan included having Intrerest Rate policy negotiated with the president and the Treasury Department reviewing the Fed's regulatory measures. Trump wants the Fed chairman to communicate with him and push for monetary policy that meets his wishes. Despite the concerns, there are obstacles to Trump's influence on the Fed in practice, such as that there are no shorts in the FOMC and that market confidence in the Fed's independence is critical. These discussions and plans are worth further consideration only after Trump's re-election, but they can strengthen the market's confidence that a rise probability of a Trump victory = looser monetary policy, higher long-term inflation.

Signs of pump stagnation

U.S. real GDP rising by 1.6% on an annualized quarterly basis in the first quarter, well below market expectations of 2.5% and a sharp slowdown from 3.4% in the fourth quarter of last year. But the Q1 GDP weighted price index came in at 3.1%, higher than expectations of 3.0% and almost double the Q4 figure of 1.6%.

Personal Consumption Expenditures (PCE) came in at an annualized preliminary rise of 2.5%, a sharp slowdown from 3.3% in the previous month and also lower than the expected 3%, while the core PCE price index excluding food and energy rise 3.7% on an annualized basis, beating expectations of 3.4% and almost double the previous value of 2%, marking the first quarterly rise in a year. It shows that core inflation remains stubborn.

Signs of sluggish pump were the core logic of the market Plummet on Thursday.

A modest bond issuance program may bring optimism

The current cash level of the US Treasury is well above the upper limit of the previous forecast. As of yesterday, the Treasury had about $955 billion in cash in general account, an long of $205 billion than expected. The Treasury's cash levels increased significantly, largely due to the unexpected high income from the April 15 Capital Gains Tax.

Against the backdrop of "surplus food on hand", there is no urgent need for the Ministry of Finance to urgently issuance short-term bills, resulting in RRP balances falling close to 0. In other words, systemic liquidity in the U.S. will not fall back to the level that caused panic in the market anytime soon.

The U.S. Treasury has been accelerating the pace of bond issuance over the past year, but it now appears that the momentum is about to pause. The federal budget deficit narrowed in FY 2024 compared to FY 2023, largely due to strong revenue rise and broadly flat spending.

Therefore, lower debt issuance is expected to be generally favourable information for risk assets for the market.

With less than 7 months to go until the 2024 U.S. presidential election, there could be a significant change in U.S. fiscal policy. Sooner or later, the Treasury may need to expand the auction again to meet future deficit demand, and the market may need to adjust.

Small banks that are easy to confuse

After the market closed on Friday, the media reported that Republic First Bank in the United States was taken over by the FDIC, but if you look closely at the FDIC's data, Republic First had about $6 billion in assets and $4 billion in deposits in January, and this bank is very small, similar to last year's thunderstorm Silicon Valley Bank's 200 billion assets, Signature Bank's $110 billion, and First Republic Bank (similar to the name) 2300 100 million assets are not the same, and they were delisted by the exchanges last year. Therefore, it failed to cause the market to "burst" on digital money like last year.

Money Flow

China Concept Funds under the EPFR caliber have seen outflows for 7 consecutive weeks, in contrast to the record inflows of northbound funds

The Goldman Sachs Fundamental long short Strategy Fund's net exposure rose to 55%, at the 1-year 97th percentile, and total leverage hit a 5-year high.

Hedging funds were sharply net buying U.S. equities for the second week in a row, the fastest in five months, largely driven by longing buying and shorting covering (7 to 1). Mainly concentrated in the information technology and healthcare industries, consumer goods, energy, etc. were sold.

The allocation of funds to semiconductor stocks reached a five-year high.

Goldman Sachs strategists believe that the rise of inflation and policy risks could put pressure on the stock market in the short term. After the Intrerest Rate market correction is over and inflation data improves, it may be a good time to increase equity longing. High-quality and non-U.S. stocks are likely to perform better. (As U.S. equity risks accumulate, some funds are starting to allocate to higher-quality stocks with lower valuations and more solid performance, as well as non-U.S. markets with improved fundamentals to balance portfolio risk, which may be in or earlier than the U.S.)

Institutional perspectives

JPMorgan Chase: TSMC's technological breakthrough, a key engine in the AI era

JPMorgan Chase & Co. has an "overweight" rating on TSMC and a price target of NT$900 coin. The report highlights TSMC's leadership in technological innovation and advanced packaging, as well as its key role in the AI era. Through a series of technological breakthroughs, including the launch of the newly announced A 16 process Node, the unveiling of advanced packaging technology SoW, and further innovations in silicon photon technology. TSMC is expected to maintain its leading position in the semiconductor industry in the coming years.

Societe Generale: Before the yen bottoms, there may be a final, sharp fall

Kit Juckes, Forex strategist at Société Générale: The yen's falls have become disorderly, suggesting that there may be a final sharp falls before bottoming. At the moment, US yields are rise, while Japanese yields are still support by very low short-term Intrerest Rate Intrerest Rate that have provided positive returns for the shorting-day metatransaction, keeping the Margin Trading community optimistic over the past few months. However, the USD/JPY earnings gap will narrow significantly in the coming quarters. If USD/JPY's purchasing power parity is now at the mid-90s level, the fair value would still be around 110 even after adjusting for U.S. exceptionalism and Japanization.

Supplement: Most institutions believe that the Central Bank will send hawkish signals by adjusting bond purchases to support the yen. As a result, last week's Central Bank decision only said that it would maintain the scale of March, and did not say anything about reducing bond purchases. The BOJ seems to have some intention of abandoning the Exchange Rate, and such a dovish move will cause the yen to fall further, in fact, it will directly fall below the 158 mark.

Follow this week

In the coming days, investors will turn their attention to the results of Mag 7 and his members. Amazon is scheduled to report earnings next Tuesday, Apple on Thursday, and Nvidia on May 22.

The U.S. Treasury Department on Monday and Wednesday will announce plans for Treasury issuance in the coming quarter. After three consecutive quarters of increasing the size of financing, the market is closely watching this quarter's financing, buyback programs, and Treasury Secretary Janet Yellen's further explanation of the long-term financing strategy.

However, a series of interesting data may suggest that the US Treasury may unexpectedly drop its funding expectations – which will lead to a squeeze on bond market shorts.

In addition, it is also necessary to pay attention to the Fed's policy decision on Wednesday and Chair Powell's press conference to assess the likelihood of a rate cut in the near term. The market does not expect much change in the FOMC's post-meeting statement and no new dot plot releases.

Chair Powell is not expected to change his current monetary policy stance in the near term. He is likely to reiterate recent comments that recent data have not strengthened his confidence that inflation will come down. Considering that the latest Fed Funds futures implied Intrerest Rate are expected to cut rates at just 1.3/34 bps for the full year, which is very extreme, yields will fall more than short in the upper pump short if Powell does not give a significantly more hawkish speech.

In addition, it is necessary to pay attention to whether the Fed will issue a statement on slowing down the reduction of the balance sheet to warm up taper QT, and at the same time prepare for a possible sudden tightening of liquidity in the coin market, and slow down the rapid upward rate of US Treasury Intrerest Rate in the near future, if clear measures can be introduced, the probability of the market big pump is high.