The Wednesday Market Minute
- Global stocks slip from record highs as investors parse through faster-than-expected inflation data while tracking the spread of Delta-variant coronavirus infections in major economies around the world.
- Fed Chair Jerome Powell begins two-days of Congressional testimony later this mornings, with investors focused on inflation comments following Tuesday’s searing CPI data, which showed the fastest headline inflation since 2008.
- Benchmark 10-year note yields rise past 1.4% following a weaker-than-expected 30-year bond auction as trader adjust rate hike bets in the wake of three straight months of hot CPI, but ease to 1.37$ after Powell comments.
- Apple shares leap following a Bloomberg report that the iPhone maker is asking suppliers to boost handset production by as much as 20% this year.
- U.S. equity futures suggest a firmer open on Wall Street ahead of June PPI data at 9:30 am Eastern time and better-than-expected second quarter earnings from Bank of America, Citigroup and Delta Air Lines.
Wall Street futures moved higher Wednesday as stronger-than-expected bank earnings, as well as dovish remarks from Federal Reserve Chairman Jerome Powell ahead of his Congressional testimony, offset concerns over yet another hotter-than-expected inflation reading from the world’s biggest economy.
Powell begins his semi-annual appearance on Capitol Hill Wednesday with questions from the House Financial Services Committee, but investors will undoubtedly be tracking his comments on inflation prospects after CPI surged to highest levels since 2008 last month, adding further pressure to the Fed’s ‘transitory’ narrative.
“We continue to expect that it will be appropriate to maintain the current target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” Powell said in prepared remarks released at 8:30 am Eastern time.
“As always, in assessing the appropriate stance of monetary policy, we will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal,” Powell added.
Markets are still divided as to the duration of the current inflation surge, although data from Bank of America’s closely-watched fund managers’ survey indicates that a sizeable majority expect price pressures to wane in the coming months.
Still, a weaker-than-expected auction of $24 billion in 30-year bonds yesterday, which followed the CPI data release, pushed benchmark 10-year note yields past 1.4% in overnight trading and pegged the dollar at its highest levels in three months against the euro.
Stocks will have more than inflation data to digest today, with factory gate prices released at 8;30 am Eastern time, as well as second quarter earnings from Bank of America (BAC) – Get Report , Citigroup (C) – Get Report and Wells Fargo (WFC) – Get Report coming hot on the heels of stronger-than-expected updates from JPMorgan (JPM) – Get Report and Goldman Sachs Group (GS) – Get Report.
Citigroup gained 0.3% after the release of $2.4 billion in credit loan provisions helped boost its bottom line to $2.85 per share, while Bank of America fell 1.7% after a slump in net interest income clouded a solid second quarter bottom line.
Futures contracts tied to the Dow Jones Industrial Average, which briefly passed the 35,000 point mark on Monday, are priced for a 100 point opening bell gain while those linked to the S&P 500 are indicating an 18 point advance.
A Bloomberg report suggesting Apple (AAPL) – Get Report is asking suppliers to boost smartphone production by as much as 20% this year, as well as a price target boost from JPMorgan, has shares in the world’s biggest tech company trading 1.9% higher in pre-market dealing, helping lift Nasdaq futures to indicate a 105 point opening bell gain.
In other markets, data from China indicating a rare decline in crude imports over the first half of the year — the first since 2013 — as well as ongoing demand and travel concerns linked to the spread of Delta-variant coronavirus infections has oil prices on the back foot Wednesday, with WTI trading 50 cents lower at $74.75 per barrel.
The Energy Department will publish weekly data on domestic crude stocks at 10:30 am Eastern time following a private reading from the American Petroleum Institute that showed a 4.1 million barrel decline over the period ending July 9.
European stocks drifted from record highs reached on Tuesday after a faster-than-expected reading of U.K. inflation for the month of June — at 2.5%, it’s the fastest CPI reading in three years — and ongoing concerns for travel and business restrictions amid the accelerating Delta-variant spread.
Overnight in Asia, the Nikkei 225 closed 0.38% lower at 28,608.49 points while the region-wide MSCI ex-Japan benchmark slipped 0.29% heading into the final hours of trading.
