“If you can keep your wits about you while all others are losing theirs, and blaming you. . . . The world will be yours and everything in it, what’s more, you’ll be a man, my son.” — Rudyard Kipling

1. Senate Passes $95 Billion Package to Help Ukraine and Israel — the Senate passed a long-delayed $95.3 billion foreign-aid package sending much-needed ammunition and military equipment to beleaguered Ukrainian soldiers and fortifying Israel’s missile defense systems, while also forcing the sale of Chinese-controlled TikTok in the U.S. The 79-to-18 vote brought to a close months of wrenching debate over Ukraine that sharply split the Republican Party, with rank-and-file members openly rebelling against their leaders. The fight also called into question both how far the U.S. would go to defend the country, now in the third year of trying to repel Russia’s invasion, as well as America’s leadership role in the world.
The measure passed the House on Saturday and now goes to President Biden’s desk. Biden, who has been pushing for a big foreign-aid package since the fall, signed it into law Wednesday.
2. GDP growth slowed to a 1.6% rate in the first quarter, well below expectations — Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department’s Bureau of Economic Analysis. Economists surveyed by Dow Jones had been looking for an increase of 2.4% following a 3.4% gain in the fourth quarter of 2023 and 4.9% in the previous period.
Consumer spending increased 2.5% in the period, down from a 3.3% gain in the fourth quarter and below the 3% Wall Street estimate. Fixed investment and government spending at the state and local level helped keep GDP positive on the quarter, while a decline in private inventory investment and an increase in imports subtracted. Net exports subtracted 0.86 percentage points from the growth rate while consumer spending contributed 1.68 percentage points.
3. Key Fed inflation measure rose 2.8% in March from a year ago, more than expected — the personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday. That was above the 2.7% estimate from the Dow Jones consensus. Including food and energy, the all-items PCE price gauge increased 2.7%, compared with the 2.6% estimate.
On a monthly basis, both measures increased 0.3%, as expected and equaling the increase from February. Consumers showed that they are still spending despite the elevated price levels. Personal spending rose 0.8% on the month, a touch higher even than the 0.7% estimate though the same as February. Personal income increased 0.5%, in line with expectations and higher than the 0.3% increase the previous month.

The week ahead — Economic data from Econoday.com:

“He that can have patience can have what he will.” –Benjamin Franklin

1. Biden Calls for Steep Hike to Tariff on Chinese Steel — Biden, is asking his trade officials to more than triple a key tariff rate on Chinese steel and aluminum products to 25% from 7.5%. That higher levy would be in addition to a separate 25% tariff on steel and a 10% duty on aluminum imposed under the Trump administration. A senior administration official said the higher tariffs would only affect 0.6% of U.S. demand for steel. Biden’s move comes as the administration is studying raising tariffs on a range of Chinese exports to the U.S., including electric vehicles, batteries and solar products. The higher metal levies would go into effect as part of the Biden administration’s decision on how to adjust tariffs that date from former President Donald Trump’s time in the White House, senior Biden administration officials said.
2. Housing Market Slumps as Mortgage Rates Top 7% — the average rate on the standard 30-year fixed mortgage jumped by nearly a quarter percentage point to 7.1%, according to a survey of lenders released Thursday by mortgage-finance giant Freddie Mac. That is the highest level since late 2023 and the largest weekly increase in nearly a year. Existing home sales in March, meanwhile, fell 4.3% from February in what was the largest percentage decline on a monthly basis since November 2022, the National Association of Realtors said Thursday. The housing market’s recent turbulence is cutting short a positive start to the year. Sales tumbled to their lowest level in nearly 30 years in 2023. But they rose during the first two months of this year as a number of buyers took advantage of a decline in mortgage rates to resume their home search. Active listings ticked higher and real-estate showings picked up in January.
3. Israel Strikes Iran in Narrow Attack Amid Escalation Fears — the attack was a targeted strike in the area around Isfahan in central Iran, one of the people said. Iranian media and social media reported explosions near the city, where Iran has nuclear facilities and an air base, and the activation of air-defense systems in provinces across the country after suspicious flying objects were detected. The narrow Israeli attack and Iran’s soft rhetoric in response appeared to be an attempt by both sides to calm tensions after more than a week of concerns that Israel’s war with Hamas in Gaza would metastasize into a bigger regional conflict, though fears remain of a miscalculation. Israel has been under pressure from the U.S. and Europe to moderate its response and faced the challenge of delivering a blow that would punish Iran for the attack without provoking a response.
4. China Hits U.S. With Levy on Chemical as Trade Tensions Rise — China’s commerce ministry said imports of U.S.-made propionic acid would be subject to a levy of 43.5% after an investigation that began in July concluded the chemical was being dumped in China at rock-bottom prices and hurting Chinese producers as a result. The two U.S. companies accused of dumping in the investigation—Dow and Eastman Chemical—didn’t immediately respond to requests for comment. The move came just days after President Biden called for higher tariffs on Chinese steel and the U.S. began antidumping probes centered on China’s shipbuilding, maritime and logistics industries.

The week ahead — Economic data from Econoday.com:

“You must be shapeless, formless, like water. When you pour water in a cup, it becomes the cup. When you pour water in a bottle, it becomes the bottle. When you pour water in a teapot, it becomes the teapot. Water can drip and it can crash. Become like water my friend.” — Bruce Lee

1. Hot Inflation Report Derails Case for Fed’s June Rate Cut — the consumer-price index, a measure of goods and services prices across the economy, rose 3.5% in March from a year earlier, the Labor Department said Wednesday. That was a touch higher than economists had forecast and a pickup from February’s 3.2%. So-called core prices, which exclude volatile food and energy categories, also rose more than expected on a monthly and annual basis. Wednesday’s report had been hotly anticipated because Fed leaders had been willing to play down stronger-than-anticipated inflation readings in January and February as reflecting potential seasonal quirks. But a third straight month of above-expectations inflation data erodes that story and could lead Fed officials to postpone anticipated rate cuts until July or later.
2. Wholesale Prices Rose 0.2% in March, Less Than Expected — the producer price index rose 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus and not as much as the 0.6% increase in February, according to a release Thursday from the Labor Department’s Bureau of Labor Statistics. However, on a 12-month basis, the PPI climbed 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated. Excluding food and energy, the core PPI also rose 0.2%, meeting expectations. Excluding trade services from the core level, the increase was 0.2% monthly but 2.8% from a year ago.
3. China Tells Telecom Carriers to Phase Out Foreign Chips in Blow to Intel, AMD — Officials earlier this year directed the nation’s largest telecom carriers to phase out foreign processors that are core to their networks by 2027, a move that would hit American chip giants Intel INTC -5.16%decrease; red down pointing triangle and Advanced Micro Devices AMD -4.23%decrease; red down pointing triangle, people familiar with the matter said. The deadline given by China’s Ministry of Industry and Information Technology aims to accelerate efforts by Beijing to halt the use of such core chips in its telecom infrastructure. The regulator ordered state-owned mobile operators to inspect their networks for the prevalence of non-Chinese semiconductors and draft timelines to replace them, the people said.
4. U.S. Moves Warships to Defend Israel in Case of Iranian Attack — The moves by the U.S. that are part of an effort to avoid a wider conflict in the Middle East came after a warning from a person familiar with the matter about the timing and location of the potential Iranian attack. A person briefed by the Iranian leadership, however, said that while plans to attack are being discussed, no final decision has been made. Army Gen. Erik Kurilla, the head of U.S. Central Command, discussed a possible Iranian attack with Israeli Defense Minister Yoav Gallant in Israel on Friday. “We are prepared to defend ourselves on the ground and in the air, in close cooperation with our partners, and we will know how to respond,” Gallant said, according to Israel’s Defense Ministry.

The week ahead — Economic data from Econoday.com:

“The most dangerous thing is to buy something at the peak of its popularity. At that point, all favourable facts and opinions are already factored into its price and no new buyers are left to emerge” ― Howard Marks

1. Tesla’s Quarterly Deliveries Fall for First Time Since 2020 — Elon Musk’s electric-vehicle maker delivered 386,810 vehicles globally in the first three months of 2024, down 8.5% from a year earlier. It was the company’s lowest quarterly performance since the third quarter of 2022. The result was enough for Tesla to reclaim the title from China’s BYD as the world’s top EV seller on a quarterly basis. Yet, it is a troubling sign for the broader electric-vehicle market, where growth is slowing and automakers including Ford Motor and General Motors are recalibrating investment plans after finding consumers to be less enthusiastic about going electric than the companies had expected.
2. Powell Still Sees Room for the Fed to Cut Rates This Year — Powell pointed to signs that labor-market conditions are less tight than they have been in recent years, a view that has eased concerns that paychecks and prices might rise in tandem. Meanwhile, signs of firmer-than-expected inflation in January and February haven’t shaken the Fed’s stance that price growth will continue to slow down despite some bumps, Powell said at a conference in Stanford, Calif. Fed officials raised rates rapidly over the past two years to address a surge in inflation, which hit a 40-year high. They have held their benchmark short-term rate in a range between 5.25% and 5.5% since July.
Measures of underlying inflation have cooled notably since the middle of 2023. That has allowed the Fed to shift its attention away from whether to keep raising rates and toward when to lower rates from a level that some officials thought was necessary to defend against inflation becoming stubbornly elevated.
3. Oil Is Hitting Its Highest Level in Months — The rally in crude picked up speed this week after an Israeli strike on an Iranian diplomatic building fanned worries of a broader regional war. Undergirding prices: a relative lack of crude in global markets thanks to production cuts from OPEC and its allies. Brent crude futures, the benchmark, have climbed 18% in 2024 to exceed $90 a barrel for the first time since October. That is feeding into gasoline, with average national prices measured by AAA up 15% this year at $3.57 a gallon. Gasoline supplies are a possible pinch point ahead of the busy summer driving season. Inventories in the U.S. are 3% below the recent average for this time of year, close to the lowest for this time of year in the past five years.
4. U.S. creates 303,000 jobs in March. Much bigger increase than expected — The U.S. created a larger-than-expected 303,000 new jobs in March and signaled the economy is still expanding at a solid pace, but the report won’t make it any easier for the Federal Reserve to decide when to cut interest rates. The increase in new jobs was the biggest since May 2023. Economists surveyed by The Wall Street Journal had forecast a 200,000 increase in new jobs last month.

The week ahead — Economic data from Econoday.com:

The road to long-term investment success runs through risk control more than through aggressiveness. — Howard Marks

1. Japan Amps Up Intervention Threat as Yen Hits Lowest Since 1990 — The nation’s currency dipped to 151.97 versus the greenback early on Wednesday in Tokyo — beyond the level at which policymakers stepped in during October 2022 — before comments from government officials on their readiness to act boosted the yen to its strongest level of the day. The yen’s rapid decline comes even after the Bank of Japan raised interest rates for the first time since 2007. A lack of guidance pointing to further near-term policy tightening, and the central bank’s insistence that financial conditions will remain easy, have instead pushed the yen in the opposite direction — something that traders have jumped on.
2. China Industrial Profits Return to Growth — Industrial profits jumped 10.2% in the first two months of 2024, compared with a 2.3% decline for all of 2023, the National Bureau of Statistics said Wednesday. The result was partially thanks to a low base last year.
China’s state-owned companies reported a 0.5% rise in profits for January and February, while profits at foreign companies jumped 31.2%. Private companies saw growth of 12.7%.
Profits in China’s manufacturing sector expanded 17.4% in the first two months of the year, while that of the utilities sector surged 63.1%. The mining sector was the main drag on overall profit growth, seeing its profit drop 21.1% in the January-February period.
The main contributor to overall profit growth was equipment manufacturing, which recorded a 28.9% expansion from a year ago.
3. GDP update boosts U.S. fourth-quarter economic growth rate to 3.4% — The final reading of U.S. growth in the 2023 fourth quarter was raised a few notches to a 3.4% annual pace, reflecting strong consumer spending and a surprisingly resilient economy. The government previously said gross domestic product had expanded at a 3.2% rate in the final three months of last year. The figure is adjusted for inflation. The growth rate of the economy is forecast to taper to a still-healthy 2% in the soon-ending first quarter.
4. Fed’s Favored Inflation Gauge Rose 2.5% in February — The overall personal-consumption expenditures price index rose 2.5% over the 12 months through February, the Commerce Department said Friday. That was in line with forecasts from economists polled by The Wall Street Journal. Core prices excluding volatile food and energy prices rose 2.8%, also in line with forecasts. From January to February, the PCE price index increased 0.3%, less than the 0.4% increase economists expected. The core index rose 0.3%, in line with expectations.
Another inflation gauge has shown price pressures were stickier than expected in the first two months of the year, while job growth remained strong. Fed governor Christopher Waller said earlier this week that recent data “reinforces my view that there is no rush to cut the policy rate.”

The week ahead — Economic data from Econoday.com: