The Market Today
Powell Sees Economy at “Inflection Point”
by Craig Dismuke, Dudley Carter
24 HOURS OF MARKET ACTIVITY
Stocks Inch Lower After Records; Rates Inch Higher After Powell Posits Economy at “Inflection Point”: Investors will be busy this week, forced to juggle key economic data, a busy line-up of Fed officials discussing the economic outlook, and the start of the corporate earnings season. Amid a quiet start, however, futures tracking the Dow and S&P 500 were lower by 0.2% around 7 a.m. CT after notching records Friday, tracking a mostly weaker global session. Shares in India slumped more than 3.5% to lead broad losses in Asia after the country reported a new record for daily infections. Europe’s Stoxx 600 had declined 0.3% despite retail sales in the Eurozone beating expectations in February. While the U.K. is easing restrictions today, much of Europe has implemented more stringent measures in recent weeks as it struggles with a new infection wave and flagging vaccine rollout.
Treasury yields were tilting higher heading into U.S. trading, led by 1.3-bps increases for the 5-year and 7-year notes. The 10-year yield was up by less than 1 bps to 1.67% with $38b of new 10-year debt set to be auctioned at noon CT. Fed funds futures had inched down in a low-volume overnight session after Fed Chair Powell reiterated in a pre-recorded Sunday interview on 60 Minutes that officials want to see inflation set to run above 2% for some time before considering raising rates. However, he also sounded increasingly optimistic about the outlook. “We feel like we’re at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly,” Powell said, adding that the economy appears to be at an “inflection point.”
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
ICYMI – April 9, 2021 Weekly Market Recap: Treasury yields declined last week and stocks climbed to records following a record for the Services ISM in March and persistently dovish Fed Minutes. Strength in business activity and new orders across the U.S. services sectors was the broadest since the late 90s according to the ISM’s latest survey, helping lift the headline to a record high. While Fed officials also saw an improving outlook, as evidenced by their upgraded projections when they met in March, Minutes from that meeting showed officials didn’t seriously discuss pulling back on accommodation. President Biden’s quest to spend $2.25 trillion on U.S. infrastructure received a boost from the Senate parliamentarian’s ruling that reconciliation may be available more than once each fiscal year. However, pushback from some moderate Democrats on the scope of the bill kept uncertainty around success elevated. Separately, the president also released his budget for the 2022 fiscal year, requesting an 8.4% increase in discretionary spending to $1.52 trillion. The S&P 500 set four new records last week as it gained 2.7%. The 5-year yield led the curve lower with an 11.4-bps drop to 0.86%. Click here to view the full recap.
Treasury Deficit to Hit Another Record: Today’s economic calendar will only bring the March monthly Budget Statement from Treasury. The monthly deficit is expect to explode higher to $658 billion, the largest on record. Also on the calendar, Boston Fed Bank President Rosengren is speaking at 12:00 noon CT.