The Market Today
FOMC Minutes As Investors Remain Concerned About Inflation
by Craig Dismuke, Dudley Carter
Mortgage Applications Yet to Show Resumption of Housing Strength: Mortgage applications for the week ending May 14 rose 1.2% as purchase apps fell 4.1% and refi apps increased 4.0%. The average outstanding 30-year mortgage rate inched up to 3.15%.
FOMC Minutes and More Fedspeak: Nearly every Fed official that has made remarks in recent weeks has said they believe the firmer inflation pressures expected this summer will moderate. Even after the CPI inflation surprised markets, several Fed officials held the line of transitory price increases. However, investors have become antsy that those pressures may persist and could force the Fed’s hand. Today’s April FOMC Minutes (1:00 p.m. CT) will give more insight into their discussions, particularly illustrating if there is momentum building to do anything other than being patient. Also speaking today are St. Louis’s Bullard (9:00 a.m.), Vice Chair Quarles (9:00 a.m.), and Atlanta’s Bostic (10:35 a.m.).
24 HOURS OF MARKET ACTIVITY
Solid Corporate Earnings from U.S. Retailers Fail to Stop Equities’ Slide Amid Inflation Concerns
The S&P 500 fluctuated between gains and losses during morning trading before falling after lunch and ending at its daily low, down more than 0.8%. After both companies’ financial results beat expectations, Walmart shares held on to pre-market gains while shares of Home Depot slipped back into negative territory and closed lower on the day. Shares of home builders fell more than 3% after housing starts and building permits data disappointed in April and energy companies and other cyclically sensitive sectors led declines in nine of the index’s 11 sectors. The Nasdaq slipped 0.6% while the Dow dropped 0.8%. Treasury yields hit their daily lows at the open of U.S. trading following the morning’s housing data, but were relatively uneventful throughout the remainder of the day. The 10-year yield dipped 1.2 bps to 1.64%, less than the 1.8-bp decline for the 5-year yield to 0.82%.
Global equities are weaker Wednesday and U.S. equity futures are backpedaling after the major indices slid in the second half of Tuesday’s session. Markets have been volatile since the U.S. CPI consumer inflation report startled investors last Wednesday and sent Treasury yields higher. The 10-year yield was 1.5 bps higher shortly after 7 a.m. CT to above 1.65%, its highest level this week. Nasdaq futures, which are the most sensitive to rising rates, were leading declines with a 1.4% drop. Contracts on the Dow had declined 0.8% while S&P 500 futures were down 1.0%.
Infrastructure Talks Still Focused on Defining Infrastructure: Senate Republicans met with the White House again yesterday presenting their newest version of an infrastructure spending package. Politico reported that, “Republicans and the administration are ‘closing in on’ the parameters for what constitutes infrastructure,” quoting top Republican negotiator, Sen. Shelley Moore Capito. There is clearly much work still to be done.
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
More Companies Take Off Their Mask Mandates: With the quarterly corporate earnings season nearing its end, companies which have already reported their results are receiving new attention for their responses to the CDC’s updated guidance, which says vaccinated individuals no longer need to wear a mask in most settings. Lowe’s and Best Buy became the latest household names to announce that their staff and customers who have been fully vaccinated will no longer be required to wear a face covering inside their stores. JPMorgan sent a memo to U.S. employees announcing that anyone who has been fully vaccinated can leave their masks at home.