The Market Today
Quiet Start to Busy Week; Vining Sparks 3Q Economic Outlook Webinar on Tuesday
by Craig Dismuke, Dudley Carter
Vining Sparks 3Q Economic Outlook Webinar: (Registration Link) Vining Sparks will host our 3Q Economic Outlook Webinar Tuesday morning at 10:00 a.m. CT. We will walk through the current state of the economic recovery and dig into the tensions evident in the labor market. We will also highlight the most recent inflation picture and the basis for our expectation of higher inflation over the short term but moderation over the medium term. Finally, we will lay out our expectations for the path of monetary policy.
No Reports Today; Corporate Earnings and CPI Inflation Tomorrow: There are no economic reports on the calendar today. However, the now-paramount consumer inflation report for June will be released tomorrow, followed by the June retail sales data on Friday. Headline CPI is expected to pull back from +5.0% YoY to +4.9% while core CPI is expected to increase from +3.8% YoY to +4.0%. However, the details will be the focus more so than the headline figures. Also tomorrow, JPM, GS, and BAC will kick off 2Q earnings reports with expectations for big numbers. One of the keys to the earnings season will be commentary on price pressures and supply chain disruptions.
24 HOURS OF MARKET ACTIVITY
Treasury Yields and Stock Futures Inch Lower in Quiet Start to Busy Week: U.S. equity index futures were mixed as the open of U.S. trading approached amid uneven global trading, but hadn’t wandered too far from last Friday’s record closes. The quarterly corporate earnings season kicks off in earnest tomorrow with the largest U.S. financial institutions breaking the ice. Treasury yields were modestly lower before 7 a.m., led by longer maturities. Yields fell again last week but pared the drop with a rise on Friday (more below). In addition to the commencement of the corporate reporting calendar, the U.S. Treasury will auction off $58 billion in 3-year notes and $38 billion of 10-year notes later today, as well as $24 billion of 30-year bonds tomorrow. Also a weekly focus for rates, June’s CPI data tomorrow is expected to report another firm month for consumer prices. The overnight decline in Treasury yields was more modest than the slightly larger average decline across Europe. European yields fell after ECB President Lagarde said Sunday, days after the central bank announced a higher inflation target, that, “We need to be very flexible and not start creating the anticipation that the exit is in the next few weeks, months.” At 7:25 a.m. CT, S&P 500 futures were down around 0.15%, splitting larger moves for the Dow (lower) and Nasdaq (higher). The 2-year Treasury yield had dipped 0.2 bps to 0.21% while the 10-year yield had dropped 1.7 bps to 1.34%.
ICYMI – July 9, 2021 Weekly Market Recap: The recent downtrend in Treasury yields picked up last week, pushing longer yields to multi-month lows. After a break Monday for Independence Day, the 10-year yield moved sharply lower again, adding to a 10-bp drop from the week before. Spurring the early-Tuesday move, equity futures had weakened overnight and oil prices ricocheted off of a six-year high. The daily negativity was solidified by a disappointing ISM Services report which included the first contractionary employment index since December. While Wednesday’s JOLTS report broadly showed the labor market remained tight – openings hit a record and approximated the number of individuals reporting as unemployed – there was also evidence momentum slowed slightly. The presumed slack in the labor market was a major reason why the Fed forewent adjusting asset purchases when they met in June, based on the meeting Minutes released later Wednesday. Officials, however, indicated a growing concern about inflation and saw inflation risks as clearly tilted to the upside. The dynamics of high unemployment and inflation will make monetary policy in the second half of this year quite interesting under the Fed’s recently adopted framework. The ECB joined the Fed in tweaking their framework, announcing last Thursday that its inflation goal was a “symmetric” target of “2%…over the medium term,” a dovish move away from the previous goal of “below, but close to, 2%.” Before climbing Friday to pare its weekly decline, the 10-year Treasury yield had fallen as low as 1.248% on Thursday, a low since February 16. The major stock indices rose by less than 0.5% during the four days of trading, all closing Friday at new record highs. Click here to view the full recap.
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