The Market Today
Corporate Earnings Deluge Continues as FOMC Meeting Begins
by Craig Dismuke, Dudley Carter
FOMC Meeting Begins: The Fed will begin its two-day FOMC meeting today with expectations for minor tweaks to their Official Statement. The general consensus appears to be for no major changes to monetary policy. While the economy and inflation outlooks are both materially different today than they were March 16, Fed officials have yet to change their tune on being patient until they see evidence of sustained inflation at, or above, their 2% target.
Economic Data – Home Prices, Confidence, Regional Fed Report: At 8:00 a.m. CT, the FHFA and S&P CoreLogic Home Price reports for the month of February are expected to show further strengthening in prices. Both reports are expected to show another 1.0%+ gain month-over-month. At 9:00 a.m., the April report on consumer confidence from the Conference Board is expected to recover further. Also at 9:00 a.m., the April Richmond Fed Index is expected to add to the collection of strong April reports.
Corporate Earnings Deluge: The corporate earnings calendar is packed today. Alphabet (Google), Microsoft, Starbucks, and GE, among others, will all report earnings after the close today.
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
U.S. To Share Astra Shots with the World in Months Ahead: A White House COVID-19 adviser said Monday that, “Given the strong portfolio of vaccines that the U.S. already has and that have been authorized by the FDA, and given that the AstraZeneca vaccine is not authorized for use in the U.S., we do not need to use the AstraZeneca vaccine here during the next several months. …Therefore the U.S. is looking at options to share the AstraZeneca doses with other countries as they become available.”
New York and New Jersey to Loosen Restrictions from Mid-May: Germany said it hopes to make vaccines available to all adults in early June and could soon loosen restrictions on its citizens that have been fully vaccinated. Nonetheless, Chancellor Merkel said the risk of new cases placing too much strain on the hospital system is still present. A little southeast from there, Turkey’s President Erdogan announced a lockdown of the country from April 29 through May 17 to address its pandemic. In the U.S., governors from New Jersey (May 10) and New York (May 15) announced plans to increase occupancy limits for indoor and outdoor activities.
24 HOURS OF MARKET ACTIVITY
Treasury Yields Posted Small Rise as Stocks Hit Records to Start Busy Week: Monday’s moves in the stock market weren’t impressive in size but were sufficient to land the S&P 500 and Nasdaq at new record highs before key developments later in the week. The S&P 500’s 0.2% gain split a 0.2% decline for the Dow and a 0.9% gain for the Nasdaq. Shares of Tesla rose ahead of its after-market earnings announcement to give a lift to the consumer discretionary sector. The electric-car maker beat earnings expectations for the first quarter. Tech companies also saw their shares firm up before major names, starting with Microsoft and Google after today’s market close and including Amazon, Twitter, Facebook, and Apple, report quarterly results throughout the week. Treasury yields did rise with equities but closed off higher highs from earlier in the session. The 10-year yield added 0.9 bps to 1.57% after climbing as high as 1.60% prior to U.S. trading. The 5-year yield led increases across the curve, rising 1.3 bps to 0.83%. An auction of 5-year notes was solid but uneventful while a sale of 2-year notes tailed slightly.
Treasury yields have continued higher overnight, with the 10-year yield up another 1.8 bps to 1.58% around 7 a.m. CT, and stock futures inched up after yesterday’s records. Corporate earnings remain in focus around the globe Tuesday as investors await tomorrow’s Fed decision. The Bank of Japan kept policy steady overnight. It’s updated outlook showed a stronger rebound than was projected in January but softer inflation trend that it expects will keep inflation well below target through at least early 2024. While European equities were struggling with modest losses following a mixed Asian session, S&P 500 futures were nursing a 0.1% gain.
Dallas Fed Manufacturing Index Boosted by Stronger Activity and Inflation: Another activity survey from a regional Fed Bank beat expectations in April, showing the U.S. recovery continues to gain steam amid rising vaccinations and increased re-opening. The Dallas Fed’s Manufacturing Activity index jumped from 28.9 to 37.3, topping expectations of 30.0 with its strongest reading since June 2018. While current production cooled some, new orders and employment strengthened. Consistent with trends in other surveys, indications of price increases – for materials bought and goods sold – firmed up as well. New orders and raw material prices both hit their highest levels since 2004. Encouragingly, the outlook for activity six months from now also strengthened while price pressures were seen as easing slightly.