S&P 500 (INDEXSP: .INX) futures are up 43 points as investors anticipate the passage of another Stimulus Bill and temporarily brush off inflation fears. Stocks were mixed on Friday, though were lower on the week, and are likely to remain and cautious. Last week’s pop-in interest rates will remain the focus, even as rates corrected lower on Friday, with some help from month-end demand and dip-buying.
Key Market Drivers:
- U.S. data calendar has Feb manufacturing ISM, January construction spending
- Canada data calendar has Q4 current account; Q4 GDP due later in week
- Dollar lifted out of correction lows in synchrony with lift in U.S. Treasury yields
- EGBs have rallied with European stock markets, Treasuries erased early gains
- UK final Feb manufacturing PMI unexpectedly revised slightly higher, to 55.1
- German states preliminary February inflation data on balance little changed
- Eurozone manufacturing PMI revised up to 57.9 – marking three year high
- China Markit Manufacturing PMI slipped to 50.9 in February
- Japan February Manufacturing PMI improved to 51.4 from 498
The 30-year yield finished down over 13 bps at 2.148% and the 10-year was off 10 bps to 1.425% after intraday tests of 2.39% and 1.6% Thursday. We suspect some give-back of duration buying could see rates drift higher.
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All focus is on the 10-Year rising and inflation worries. Several market analysts are even advising institutional clients to hedge inflation by going into gold, commodities, and real estate. Gold has recently dipped, but commodities are rising fast. Specifically, lumber and steel prices are making record highs.
There’s a lot of key data and events again this week, including Friday’s jobs report and more comments from Fed Chair Powell. Today’s slate is on the light side and features the February manufacturing ISM, expected steady at 58.7. January construction spending is forecast to rise 0.7% after increasing by 1.0% previously. The earnings calendar slows some but features reports from JD.com, Zoom Video, NIO, BeiGene, Novavax, and C3ai.