Morning Minutes

Earnings and Central Banks Cutting Stimulus In Focus




US index futures have been trying to stabilize so far this morning following yesterday’s declines with Dow futures flat and NASDAQ futures up 0.3%. Overseas markets continue to struggle with the Dax down 0.1%, the FTSE and Nikkei both down 0.4%, and the Hang Seng down 0.6%. Commodities are also under pressure with WTI crude oil and copper both falling 0.6%.

US producer prices out this morning confirm growing inflation pressures both for the headline number (7.3% vs street 6.8% and previous 6.6%), and the core excluding food and energy number (5.6% vs street 5.1% and previous 4.8%).   

Day two of US earnings season finds mixed results from Bank of America (EPS $1.03 vs street $0.77, sales $21.6B vs street $21.8B down 4% from a year ago). Some companies beat expectations including Delta Airlines (EPS -$1.07 vs street -$1.38, sales $7.1B vs street $6.2B), and Blackrock (EPS $10.03 vs street $9.46). Other companies scheduled to report results today include Citigroup, and Wells Fargo.

Building on yesterday’s higher than expected US consumer price inflation reports, the potential for higher inflation and lower stimulus has become a theme that may impact investor sentiment as the week progresses. Overnight, the Reserve Bank of New Zealand indicated that with its economy recovering, it is ending one of its two asset purchase stimulus programs next week. The RBNZ also commented on inflation indicating while there may be short term spikes related to commodity price swings in the short term, in the medium term, price pressures may become more persistent based on growing labor shortages and capacity constraints.

Today the Bank of Canada is meeting with a decision and statement due at 10:00 am EDT followed by a press conference at 11:15 am EDT. Press reports suggest that Governor Macklem and company may be ready to continue scaling back asset purchases with the Canadian economy continuing to reopen. Any comments on the outlook for inflation may also attract attention in light of what the RBNZ had to say.

US Federal Reserve Board Chair Jerome Powell is testifying to Congress at noon EDT today. The Fed has been beating down inflation expectations in recent months and maintaining its monetary stimulus programs at full speed, any hints or change in tone away from full-on dovish could potentially impact investor attitudes as the day progresses.  Tonight Chinese GDP, retail sales, house prices and industrial production reports are due.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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