Morning Minutes

Stocks Slump as Rates Rise, Canadian Producer Prices Show Inflation Spiking




A promising start to Thursday by US indices was snuffed out by hawkish comments from Fed Chair Powell, which seemed to hint at a 0.50% rate hike at the May Fed meeting and with the potential for additional larger than 0.25% rate hikes to follow, which sent US some US treasury yields climbing ever closer to the 3.00% psychological level.

US indices finished down 1.0%-2.0% on Thursday and the slide has continued overnight through Asia Pacific trading where Tokyo and Sydney both fell about 1.6%, and into European trading this morning where the Dax is down 1.7% and the FTSE is down 0.7%. US index futures are indecisive this morning with NASDAQ futures up 0.2%, a small rebound compared to yesterday’s 2.0% loss, and Dow futures down another 0.2%.

These declines have come despite generally positive flash Manufacturing and Service PMI reports overnight, from Australia, Japan, and several European countries. Overall, most numbers were in the 54.0-58.0 range, indicating moderate growth in the world economy. Generally speaking, for most countries one of the numbers was slightly better than expected and one was slightly below expectations. US flash Manufacturing (street 58.2 vs previous 58.8) and flash Service (street 58.0 unchanged) PMI reports are due at 9:45 am EST.

Canadian industrial prices (4.0% vs street 1.7%) and raw material prices (11.8% vs street -0.1%) soared in March, indicating that inflation pressures continue to increase, keeping pressure on central banks to remain hawkish. Canadian retail sales for February (0.1%% vs street -0.1%) and retail sales ex-autos (2.1% vs street 0.0%) were better than expected. UK headline retail sales (0.9% vs street 2.8%) and UK retail sales ex-fuel (-0.6% vs street +0.7%), however, were disappointing.  

Corporate news has been mixed. Clothing retailer Gap is getting slammed in premarket trading, plunging 17.0% after cutting sales guidance due to supply chain issues and announcing the CEO of its Old Navy division is leaving. Driller Slumberger beat the street on earnings ($0.34 vs street $0.33) and raised its dividend by 40%. American Express also beat expectations ($2.73 vs street $2.44).

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A replay of the SIA Wealth Market Outlook Webinar with SIA Wealth’s President, Ted Bader, who presented an update on our “Uncharted Waters” presentation from October 2021.  

YouTube Version:

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Colin Cieszynski, Chief Market Strategist

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

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