Morning Minutes

US Market Declines Extend Into May as FOMC Decision Day Approaches




US index futures have started May just as they ended April, stuck in reverse gear. US index futures are in the red, falling 0.1% to 0.5% with NASDAQ futures leading the way lower just as the NASDAQ did on Friday with a 4.2% plunge. Overseas market action has been mixed. Chinese markets did well with Hong Kong soaring 4.0% and Shanghai gaining 2.4%, while in Europe, London is up 0.5%. Other markets have been under pressure, including declines of 1.2% for Frankfurt and 1.2% for Sydney.

Commodities are getting hammered again today. WTI and Brent Crude Oil are down 3.2%-3.6% but holding above $100.00/bbl ahead of Thursday’s OPEC+ meeting. Meanwhile, copper is down 2.6% and platinum is down 1.0%. US Dollar action is mixed with the greenback gaining 1.9% against gold, holding steady against major paper currencies, and losing 1.6% to Bitcoin.

The US 10-year treasury note yield is sitting just below 3.0% as investors await decisions and outlook commentary from this week’s three central bank meetings. The Reserve Bank of Australia is expected to finally join the tightening parade with a 0.15% rate increase widely expected. Wednesday’s Fed meeting is the main event with the US central bank widely expected to accelerate to a 0.50% rate increase and announce the start of Quantitative Tightening. The Bank of England is generally expected to announce another 0.25% rate increase when it meets on Thursday.

It is also a big week for economic data. Manufacturing PMI reports have been rolling out over the weekend and into this morning. Amid growing lockdowns, China posted weak manufacturing (41.9 vs street 53.0) and non-manufacturing (47.4 vs street 48.0) that suggest a contracting economy and could be dragging on commodities today. Manufacturing PMI reports for Australia, Japan and continental European countries were more positive in the mid to high 50s and several coming in above expectations.

North American PMI reports are due later this morning starting with Canada at 9:30 am EDT (street 57.9). The US ISM Manufacturing PMI report is due at 10:00 EDT with investors likely to focus on the headline number (street 57.6) and prices paid (street 87.5) numbers for their potential impact on the Fed decision. US construction spending is also due mid-morning (street 0.7%). The rest of the week brings Service PMI reports and US ADP payrolls on Wednesday, followed by US nonfarm payrolls and Canada employment on Friday.

Although today has been quiet for corporate news so far, we continue to move through the heart of earnings season this week with results on the way from senior companies across a number of sectors including Insurance, Travel (reservation sites, hotels, casinos), fertilizers/chemicals, ride sharing/food delivery, Canadian Software and Canadian Miners.

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Colin Cieszynski, Chief Market Strategist

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

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