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.
- 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 mixed open on Wall Street ahead of June PPI data at 9:30 am Eastern time and second quarter earnings from Bank of America, Citigroup, Wells Fargo and Delta Air Lines.
Wall Street futures traded mixed Wednesday, while bond yields marched higher and the dollar held onto recent gains, as investors focused on upcoming Congressional testimony from Federal Reserve Chairman Jerome Powell after 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 Senate Banking 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.
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.
Futures contracts tied to the Dow Jones Industrial Average, which briefly passed the 35,000 point mark on Monday, are priced for a modest 5 point opening bell decline while those linked to the S&P 500 are indicating a 4 point gain.
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 1.4% higher in pre-market dealing, helping lift Nasdaq futures to indicate a 60 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.