The Market Today
Markets Calm as Investors Look Ahead to Busy Data Day Tuesday and Wednesday’s Fed Decision
by Craig Dismuke, Dudley Carter
There are no economic reports scheduled for release on Monday.
THIS WEEK’S CALENDAR
Tuesday’s Heavy Slate of Data Precedes Wednesday’s Key Fed Decision: Despite the quiet start for markets (more below) and economic data on Monday, the action should pick up quickly beginning tomorrow. May’s retail sales data will headline a saturated slate of economic reports set to be released early Tuesday, one that will also include the NY Fed’s Empire Manufacturing Index (June), an update on Producer Price Inflation (May), the latest reading on U.S. industrial and manufacturing production (May), and a fresh home builder confidence index (June). However, Wednesday’s Fed decision should be the biggest event of the week. At 1 p.m. CT Wednesday afternoon, the Fed will announce its latest policy decision and release its second set of economic and rate projections of 2021. Thirty minutes later, Chair Powell will hold what could be a market-moving press conference to provide more color on the nature of discussions and officials updated outlooks for the economy and policy. With the inflation we’ve already seen – the growing wage pressure, continued supply disruptions, and increasing talk about possibly starting to talk about tapering – this week’s Fed meeting will be key.
24 HOURS OF MARKET ACTIVITY
Markets Calm as Investors Look Ahead to Busy Data Day Tuesday and Wednesday’s Fed Decision: Monday’s global session has thus far been notably quiet, not a surprise considering the size of the moves last week for stocks and yields (more below) and the key economic events scheduled over the next two days. Asian equity markets finished the day mixed but were missing a couple of key participants because of national holidays. Europe’s Stoxx 600, however, had edged 0.1% higher around 7 a.m. CT, unspectacular on its own but enough to earn the index a new all-time high. In the U.S., futures were mixed and little changed, with the Dow and S&P 500 split on either side of even for the day but changed by less than 0.05%. The holding pattern has ensued after a pair of records for the S&P 500 on Thursday and Friday as investors turn their focus to this week’s Fed decision. Similarly stagnant, the Treasury curve had edged higher after moving sharply lower last week but was less than 1 bp different across the curve. The 10-year yield was up 0.8 bps at 7:30 a.m. CT.
ICYMI – June 11, 2021 Weekly Market Recap: Treasury yields fell to three-month lows and the S&P 500 reached a new record, despite core CPI inflation rising at its fastest annual rate since 1992. New jobless claims declined for a sixth consecutive week to another pandemic low on widespread improvement across many states. In spite of the improvement, however, continuing claims still totaled 15.3 million as of the end of May. Combined with data earlier in the week showing a new record low for layoffs and new all-time highs for job openings, quits (see Chart of the Day), and the number of small businesses who say they can’t find workers, the scrutiny of labor supply issues intensified. However, the biggest event was Thursday’s CPI report which showed stronger-than-expected MoM and YoY inflation readings. At first glance, the YoY headline and core rates of 5.0% and 3.8% appeared overly worrisome (see Chart of the Day). However, the details showed that most of the MoM heat came from categories dealing with supply issues (e.g. autos), still adjusting to economic reopening (e.g. car rentals and airfares), or recovering from sharp drops from early in the pandemic (e.g. apparel). While the report will settle no debates on its own, it provided enough support for those in the transitory camp to stick with their position and patiently await additional data. Consistent with that assessment, the 10-year Treasury yield tumbled Thursday and reached a new three-month low of 1.4266% in overnight trading early Friday; momentum was already to the downside after a two-month trading range broke down on Tuesday. For the week, the 10-year yield dropped 10.2 bps to 1.45% and the S&P 500 gained 0.4%, ending Friday at a record high. Click here to view the full recap.
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