THE WELL-TH NOTES

By WealthTrust Advisors on May 31, 2024

Weekly data-driven insights on the markets and economy

Fifth Week of May 2024

1. Pressure’s On – Stocks slid Wednesday as pressure from rising Treasury yields outweighed a continued rally in Nvidia. The Dow Jones fell 411.32 points, or 1.06%, to 38,441.54. Its first negative session of the last three, the S&P 500 dipped 0.74% to 5,266.95. The technology-heavy Nasdaq slipped 0.58% to 16,920.58, as Nvidia’s advance somewhat mitigated losses for the index.[i]

2. Treasury Auction – Treasury yields moved higher Tuesday after a $70 billion Treasury Department auction of 5-year notes was met with weak demand. The 10-year yield rose almost 7 bps to 4.542%, while the 2-year Treasury yield shed more than 2 bps to 4.974%. Investors continue to await further data releases on inflation.[ii]

3. Sticky Inflation – The April personal consumption expenditures (PCE) index, releasing Friday, is forecast to show that the Federal Reserve’s preferred measure of inflation remained sticky, which could delay rate cuts even further in 2024. Economists expect the overall PCE to rise 2.7% y/y in April, the same rate seen in March, and rise 0.3% m/m, down only slightly from 0.32% in March.[iii]

4. GDP Slows – Gross domestic product – the broadest measure of economic activity – grew 1.3% y/y in the first quarter of 2024, the Commerce Department reported on Thursday, down from the estimated 1.6% and notably lower than the 3.4% pace in the final three months of 2023. The first-quarter growth downgrade suggests the Fed’s aim of gradually cooling the economy through high interest rates is having an impact as consumers increasingly balk at higher prices, although it remains uncertain whether the weakening trend in inflation will continue.[iv]

5. Buy Now, Pay Later -The Consumer Financial Protection Bureau declared on Wednesday that customers of the burgeoning buy now, pay later (BNPL) industry have the same federal protections as users of credit cards. It unveiled an “interpretive rule” that deemed BNPL lenders essentially the same as traditional credit card providers. This means the industry – currently dominated by fintech firms like Affirm, Klarna and PayPal – must make refunds for returned products or canceled services, must investigate merchant disputes and pause payments during those probes and must provide bills with fee disclosures. The new rule will go into effect in 60 days.[v]

6. Maxed Out – According to new research from the Federal Reserve Bank of New York, roughly 15.3% of Gen Z credit card borrowers have maxed out their credit cards. By comparison, just 4.8% of Baby Boomer borrowers and 9.6% of Gen Xers have maxed out their credit cards, which can be a sign of a severely tight cash-flow problem. Credit card delinquencies have surpassed pre-pandemic levels and continue to rise. Severe credit card delinquencies (those 90 days overdue) have now climbed to 10.7% – the highest since 2012. These findings show that pockets of financial stress continue to emerge in the U.S. economy after three years of high inflation.[vi]

7. Bitcoin Flows – BlackRock’s iShares Bitcoin Trust has become the world’s largest fund for the world’s largest cryptocurrency, racking up nearly $20 billion in total assets since listing in the U.S. in January. The ETF held $19.68 billion of tokens on Tuesday, overtaking Grayscale Bitcoin Trust’s $19.65 billion. Market analysts have been keeping a keen eye on the relative flows into BlackRock’s ETF and out of the Grayscale Bitcoin Trust since U.S. regulators approved the launch of nine new ETFs and the conversion of Grayscale’s publicly-traded trust into an exchange-traded product in January.[vii]

8. Rookie Ratings – Thanks to sensational rookies Caitlin Clark, Angel Reese and Cameron Brink, the WNBA had a huge first week in terms of attendance, ratings and digital media. The league saw a 14% increase in attendance from last year with both New York and Indiana leading the way with more than 17,000 fans at their home openers. The Liberty became the first team in WNBA history to have more than $2 million in ticket revenue for a single game in its opener. The five games on ESPN networks this year have averaged 1.43 million viewers, up 181% from the same number of games last season. It’s up 226% from last season’s average.[viii]

[i] Harring, Alex and Pia Singh, “S&P 500 posts first losing day in 3 as Nvidia’s climb fails to lift market, Dow drops 400 points: Live updates,” CNBC, May 29, 2024, https://www.cnbc.com/2024/05/28/stock-market-today-live-updates.html. Accessed May 30, 2024.

[ii] Harring, Alex and Jenni Reid, “10-year Treasury yield rises above 4.5% following weak auction,” CNBC, May 28, 2024, https://www.cnbc.com/2024/05/28/treasury-yields-dip-ahead-of-consumer-confidence-and-inflation-data.html. Accessed May 30, 2024.

[iii] Hansen, Sarah, “April PCE Index Forecasts Show Inflation Remaining Sticky,” Morningstar, May 29, 2024, https://www.morningstar.com/economy/april-pce-index-forecasts-show-inflation-remaining-sticky. Accessed May 30, 2024.

[iv] Dunsmuir, Lindsay, “Consumers curb US economic growth in first quarter, inflation cools,” Reuters, May 30, 2024, https://www.reuters.com/markets/us/us-economic-growth-revised-lower-first-quarter-2024-05-30/. Accessed May 30, 2024.

[v] Son, Hugh, “CFPB says buy now, pay later firms must comply with U.S. credit card laws,” CNBC, May 22, 2024, https://www.cnbc.com/2024/05/22/cfpb-buy-now-pay-later-credit-card-laws.html. Accessed May 30, 2024.

[vi] Egan, Matt, “1 in 7 Gen Z credit card users are ‘maxed out’,” CNN, May 17, 2024, https://www.cnn.com/2024/05/17/business/gen-z-credit-card-users/index.html. Accessed May 30, 2024.

[vii] McGee, Suzanne, “BlackRock’s ETF becomes largest bitcoin fund in world, Bloomberg News reports,” Reuters, May 29, 2024, https://www.reuters.com/technology/blackrocks-etf-becomes-largest-bitcoin-fund-world-bloomberg-news-reports-2024-05-29/. Accessed May 30, 2024.

[viii] Feinberg, Doug, “Clark, Reese and Brink have already been a huge boon for WNBA with high attendance and ratings,” OPB, May 22, 2024, https://www.opb.org/article/2024/05/22/wnba-ratings-attendance-clark-reese-brink/. Accessed May 30, 2024.