Stock Market Slightly Up Before Bell After Inflation Scare

The mixed performance on Wall Street, in spite of mostly good earnings reports, suggest bulls may have run out of steam for now. Comments from Treasury Secretary Yellen also likely startled investors, stepping out of her lane to state that rates may have to rise to contain an overheating economy.

That is in contradiction to her comments from Sunday that played down the threat of inflation from the administration’s stimulus plans. And it is in direct opposition to Fed’s, and Chair Powell’s stance, that rates will remain near 0% for a long time.

The dollar lost upside momentum, while cyclical, commodity-correlating currencies outperformed as many base metal prices scaled to fresh major-trend highs. Copper hit new 10-year highs, for instance, on reports of there being only enough warehoused copped to cover just over three weeks’ worth of demand.

Meanwhile, oil prices rose for a third consecutive day, with front-month WTI futures gaining over 1% in pegging a two-month high at $66.64.

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Key Market Drivers:

  • U.S. calendar includes ADP employment, services ISM, services PMI
  • Canada calendar has BoC Governor Macklem’s appearance at Senate Committee
  • The dollar has remained firm, breaking link with Treasury yields in latest phase
  • Canadian dollar lifted by spike in oil prices; commodity prices amid ‘super cycle’
  • EGBs declined with Treasuries as risk appetite improved
  • Eurozone final Apr PMI reports saw composite and services data revised higher
  • Australia Apr services PMI lifted to series high as demand picked up
  • New Zealand unemployment rate unexpectedly dropped back to 4.7% in Q1

Additionally, increasing talk about inflation is adding to jitters. Treasuries have rallied modestly on caution and risk aversion to keep the 10-year rate just under the 1.60%. Trading is likely to be on the choppy side into Friday’s jobs report.

Today’s April ADP employment report will be a focal point. Private payrolls are expected to rise 750k versus the previous 517k. The April services ISM is penciled in at 64.0 from 63.1. Weekly MBA mortgage and oil inventory figures are also on tap. The Treasury announces the Mary refunding to include 3- and 10-year notes, along with 30-year bonds. For Fedspeak, Evans and Mester are on deck.

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Today’s earnings calendar features reports from PayPal, Novo Nordisk, Uber, Booking Holdings, GM, Twilio, MetLife, Emerson Electric, Rocket, Exelon, Cognizant, Manulife, Trane, Sempra Energy, Barrick Gold, Allstate, Hilton, ANSYS, Sun Life, Eversource Energy, Etsy, Hubspot, CDW, FleetCor, Cerner Fox Corp., Fortis, Waters Corp., FMC, Liberty Global, Wynn Resorts, GoDaddy, and BorgWarner.

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