The Market Today

Quiet Start after Week in Which “Some” Fed Officials Broach the Taper Topic


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

Regional Fed Index Continues to Show Recovery: The Chicago Fed’s National Activity Index fell back to earth in April, down from 1.71 to 0.24.The index continues to be less useful in helping judge inflation dynamics given the recent level of volatility, and the brevity and depth of the economic shutdown.

Fedspeak: Cleveland Fed Bank President Mester (10:00 a.m. CT), Atlanta’s Bostic (11:00 a.m.), and Kansas City’s George (4:30 p.m.) are all scheduled to speak today.  Notably, Fed Governor Brainard is slated to speak at a Crypto Currency conference at 8:00 a.m.


24 HOURS OF MARKET ACTIVITY

Treasury Yields Drift Back Down to Trading Levels from before the CPI Scare a Couple of Weeks Ago

U.S. equity futures are off to a positive start after the S&P 500 and Dow posted weekly declines last week (more below). Global shares were less enthused in overnight trading as mixed trading led to a marginal net gain for a top Asia-Pacific index and Europe’s Stoxx 600 gradually erased an opening gain to trade down 0.1% at 7 a.m. CT; several major European markets were closed for holidays. Economic calendars were nearly empty around the globe as investors gear up for the release of a couple of key U.S. reports later this week. Sovereign yields had drifted lower heading into U.S. trading, although the size of the moves were benign. The 10-year Treasury yields was down by around 1 bp at 7:20 a.m. to 1.61%, its lowest level since the CPI inflation surprise on May 12 boosted yields higher.


NOTEWORTHY NEWS

ICYMI – May 21, 2021 Weekly Market Recap: Yields were little changed at the close of last week’s trading, despite an intraweek jump after Fed Minutes broached the topic of tapering and a couple of subsequent reports showed the broader recovery accelerated in early May. The sharpest move for yields came immediately following the release of Minutes from the Fed’s April meeting. The fact that a “number of participants” saw a case for kicking off tapering discussions at upcoming meetings caught markets off guard, considering Chair Powell had said in his press conference after the meeting that it was still too soon to “talk about talking about” trimming bond purchases. The move up was fleeting, however, and fizzled even as jobless claims hit a new pandemic low and preliminary Markit PMIs showing the broadest U.S. acceleration in records back to the late 2000s. A couple of regional Fed surveys were mixed and several housing reports showed tight supply remains a headwind. Quarterly data confirmed Europe’s economy fell into a double-dip recession in the first quarter but the bloc’s PMI strengthened and expanded for a second month in May, with the composite index climbing to a more-than-three-year high. ECB President Lagarde, however, said officials are closely monitoring a rise in yields and need to look through temporarily firmer inflation to see the fundamentals for a sustained and unwanted increase aren’t there. For the week, the S&P 500 slipped 0.4% while the 10-year Treasury yield was essentially unchanged at 1.62%. Click here to view the full recap.


CORONAVIRUS UPDATE  (VS Coronavirus Chartbook – PDF)

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