Morning Minutes

SIA Wealth Morning Minutes: Fed Tapering, Earnings and Inflation in Focus



Building on overnight gains of 1.4% for Tokyo, 0.9% for Frankfurt and 0.6% for London, US index futures are on the rise this morning, with gains of 0.7% to 0.9%. It remains to be seen, however if US indices will be able to hold on to these gains today or if they could follow a recurring pattern lately of morning gains being reduced, erased, or even reversed by the close.

Investors have a lot of news to reflect on this morning. Yesterday’s FOMC minutes indicated that members discussed the potential for tapering to start in November or December with an eye toward wrapping up asset purchases by July of 2022, confirming previous hints from Fed Chair Powell and others. The minutes also indicated that the Fed is well aware that increasing inflation pressures have already prompted several other central banks to reduce stimulus in recent months. The next Fed meeting is being held on November 2-3, followed by Dec 14-15 (which could land in the middle of a budget or debt ceiling showdown).

Speaking of inflation, overnight, China released mixed inflation numbers with producer prices rising more than expected (10.7% vs street 10.5%) and consumer prices rising less than expected (0.7% vs street 0.9%). US producer prices (8.6% vs street 8.7% and previous 8.3%) confirmed increasing inflation pressures stateside adding to recent higher than expected wage and consumer price reports. In other news, US weekly initial jobless claims were better than expected (293K vs street 319K).

Earnings season continues this morning with results out from Morgan Stanley ($1.98 vs $1.68) who beat the street on the back of strong results from investment banking, equity trading, and wealth management. Bank of America ($0.85 vs street $0.71) attributed beating expectations on the economy improving and banking normalizing, and growth in wealth management. Citigroup also posted better than expected earnings ($2.15 vs street $1.65) boosted by investment banking and equity trading results.

Drugstore chain Walgreens Boots also exceeded expectations ($1.17 vs street $1.02), with management indicating that increased visits from people coming in for COVID vaccine shots helped to boost sales in other parts of their stores. UnitedHealth ($4.52 vs street $4.41) beat the street and raised guidance.

Investors have responded favorably to these results so far with the five reporting companies posting gains of 1.5% to 3.0% in premarket action. Alcoa reports after the close today, followed by Goldman Sachs and Wells Fargo tomorrow morning.    

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Colin Cieszynski, Chief Market Strategist

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

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