Daily Markets: Fed Comments Help Soothe Inflation Fears

Today’s Big Picture

Equity markets in Asia-Pacific were up across the board today buoyed by the several Fed head comments yesterday that downplayed the risk of inflation and solid March quarter GDP print in Singapore. By midday trading, European equity indices were also higher on the day led by better than expected economic news out of German. U.S. equity futures point to positive open later this morning as the Federal Reserve member comments have, at least for now, soothed inflation fears and COVID-19 cases dropped to their lowest level since June, helping refuel the re-opening trade.

Data Download

International Economy

Consumer Confidence in South Korea (a barometer for global trade) rose to 105.2 from 102.2.

Singapore’s economy grew by 1.3% YoY in Q1 2021, the highest pace since Q4 2019. Despite the strong performance, the government warned of increased uncertainties due to the pandemic but maintained its 2021 forecast at 4% to 6%.

European Union leaders meet today to debate how to split the efforts and costs of the bloc's shift to a low-carbon future, at a summit that will set the tone for an upcoming revamp of EU climate change policies.

The final estimate for Germany’s Q1 GDP came in at -3.1% YoY following the -3.3% contraction in Q4 2020.

The Ifo Business Climate indicator for Germany rose to 99.2 in May, up from April’s revised figure of 96.6, beating the market’s expectation of 98.2.

PPI in Spain soared 12.8% YoY in April, up from the upwardly revised 6.4% in March, marking the biggest rise in producer prices since June 1984.

Domestic Economy

We heard from three different Federal Reserve Open Market Committee (FOMC) members yesterday and none of them expressed any concerns over inflation. Kansas City Fed President Esther George commented that the economy is very different from decades past and that pricing signals may not mean what they have meant before. Fed Governor Lael Bernard pushed the idea of a digital dollar, arguing yesterday that a digital currency backed by the Federal Reserve could provide a variety of benefits, for example, to the nearly 20% of Americans who are considered “underbanked.”

Yesterday the Chicago Fed National Activity Index fell to 0.24 in April from an 8-month high of 1.71 in March, suggesting that the pace of the economic recovery is slowing.

Today brings S&P/Case-Shiller Home Prices for which the 20-City index is expected to have risen further in March; Conference Board Consumer Confidence, which is expected to drop to 120 from April’s 121.7; New Home Sales, which are expected to fall to 955k from 1.02m in March and the usual weekly Redbook retail sales report, plus the May Richmond Fed Manufacturing Index.

Markets

The equity markets started this week off on a better foot than last week, with the Nasdaq Composite adding 1.7%, the S&P 500 rose 1.2% to close at its highest level since May 10 while the Dow added 0.6% and the Russell 2000 rose 0.3%. The Tech, Communication Services, Consumer Discretionary, and Real Estate S&P 500 sectors all rose more than 1%. Volatility, on the other hand, fell, with the VIX dropping 8.2% to end the day below 20 and its 50-day moving average fell to the lowest level since May 7. Cryptocurrencies stabilized as well, with bitcoin having dropped under $32,000 on Sunday, then rebounded 20% to $39,000 yesterday. Bloomberg’s U.S. dollar Index dropped 0.2% and U.S. Treasury yields ended the day broadly lower.

Stocks to Watch

MakeMyTrip (MMYT) reported better than expected March quarter results with EPS of $0.11 vs. the -$0.12 consensus as revenue for the quarter fell 23.5% YoY to $104.9 million vs. the $89.9 million consensus. The company shared that because several state governments in India have imposed lockdowns and travel demand has been significantly impacted during April and May 2021. The management team is “cautiously optimistic of some domestic travel recovery starting from the second quarter of the fiscal year ending March 31, 202.”

Top and bottom-line expectations for Dycom’s (DY) April quarter missed consensus expectations and the company guided revenue for its current July quarter to in-line to modestly lower. Contract revenue for the April quarter fell 11.1% on an organic basis.

Inseego (INSG) shares are trading higher this morning following the news the company has collaborated with Net4 for the deployment of 5G private networks for enterprise customers across the United Kingdom and Europe.

Live Nation Entertainment (LYV) President Joe Berchtold told CNBC’s “Closing Bell” yesterday “What we are seeing so far is that the number of shows we have booked in our large buildings, our arenas, our amphitheaters, our stadiums, those are pacing double digits ahead of where we were in 2019. Not all of those tours have gone on sale yet, we have a lot that are going on sale now every week.” The company expects demand for concerts to continue to be high in the coming years in response to the pandemic.

Lordstown Motors Corp (RIDE), the electric light-duty truck manufacturer, saw its shares fall 8.3% yesterday then another 9% during extended trading after the company cut guidance for the year’s production and announced that it will need to raise additional capital.

Reports indicate Amazon (AMZN) is getting closer to an agreement to buy MGM Studios for somewhere between $8.5 billion and $9 billion, with a formal announcement expected today.

Goldman Sachs (GS) initiated coverage of cryptocurrency exchange Coinbase (COIN) with a buy rating.

Square (SQ) rose 5.6% yesterday after reports came out that the company plans to offer savings and checking accounts in the near future.

Fitness innovator Peloton (PTON) announced it will invest $400 million to build its first U.S. factory in Ohio, with groundbreaking expected later this summer on a more than 1 million square foot facility that is expected to be producing equipment by 2023. More than 2,000 jobs are expected to be created for the area. Previously the company had acquired fitness equipment manufacturer Precor for $420 million, giving it manufacturing facilities in North Carolina and Washington.

Bally's (BALY) will enter the mobile sports betting market with the launch of the beta version of its mobile sportsbook, Bally Bet, in Colorado.

Carpenter Tech (CRS) will increase its base price for new, non-contract orders across all specialty alloy products by 6-9%. The increases will be effective with new orders placed after May 24.

Hydrofarm Holdings (HYFM) agreed to acquire House & Garden, which according to Hydrofarm CEO Bill Toler “offers a strong product line of plant nutrients that will strengthen our position in the nutrient sector and complement our rapidly expanding portfolio of premium products for controlled environment agriculture."

ACI Worldwide (ACIW) announces a collaboration with JP Morgan (JPM) that will enable merchants in some European countries to deliver in-store payment acceptance capabilities to their customers.

Authentic Brands, which owns brands such as Brooks Brothers, Aeropostale, Forever 21, Barneys New York, Lucky Brands, and Juicy Couture, is reportedly exploring an IPO offering for as soon as this year.

After today’s market close, Intuit (INTU), Nordstrom (JWN), Red Robin Gourmet (RRGB), Toll Brothers (TOL), and Zscaler (ZS) are among the companies publishing their latest quarterly results. Those looking to get a jump on those reports and others to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• May 26: Mortgage Applications
• May 27: Durable Goods Orders, GDP Price Index, Corporate Profits, weekly Jobless Claims, PCE Prices, Pending Home Sales, Kansas Fed Manufacturing Index
• May 28: Personal Income & Spending, PCE Price Index, Goods Trade Balance, Wholesale Inventories, Chicago PMI, Michigan Consumer Sentiment
• May 31: US equity markets closed for the Memorial Day holiday
• June 1: Markit Manufacturing PMI (final), Construction Spending, ISM Manufacturing PMI, IBD/TIPP Economic Optimism, Dallas Fed Manufacturing, Total Vehicle Sales
• June 2: Weekly API Crude Oil Stocks
• June 3: ADP Employment for May, weekly Jobless Claims, Unit Labor Costs Q1, Markit Services PMI, ISM Non-Manufacturing PMI, EIA Crude Oil Stocks, EIA Crude Oil Stocks, and EIA Gasoline Stocks
• June 4: Non-Farm Payrolls for May and Factory Orders
• June 8: Balance of Trade, JOLTs Report, API Crude Oil Stocks
• June 9: Wholesale Inventories, Gasoline & Crude Oil Stocks
• June 10: Inflation, weekly Jobless Claims, Monthly Budget Statement
• June 11: Michigan Consumer Sentiment
• June 15: Retail Sales, PPI, NY Empire State Manufacturing, Industrial Production, Business Inventories, NAHB Housing Market Index, Tic Flows, Foreign Bond Investment, weekly API Crude Oil stock
• June 16: Building Permits, Housing Starts, Import/Export Prices, weekly energy stocks, FOMC Economic Projections, and Interest Rate decision
• June 17: weekly Jobless Claims, Philadelphia Fed Manufacturing
• June 21: Chicago Fed National Activity Index
• June 22: Existing Home Sales, weekly API Crude Oil Stock
• June 23: Current Account, Markit Manufacturing & Service PMI, New Home Sales, EIA Energy Stock
• June 24: Durable Goods Orders, Wholesale Inventories, Weekly Jobless Claims, GDP Price Index Q1, Goods Trade Balance, Corporate Profits Q1
• June 25: Personal Income & Spending, PCE Price Index, Michigan Consumer Sentiment

Thought for the Day

“Unexpected surprises bring unlimited happiness with a big wide smile.” ~Shraddha

Disclosures

• Dycom (DY) is a constituent of the Tematica BITA Digital Infrastructure and Connectivity Index.
• Zscaler (ZS) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index.
• Peloton (PTON) is a constituent of Tematica Research’s Cleaner Living Index.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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