Wednesday's Close

E-mini S&P 500 Futures (June): Settled at 4123.25, up 3.00

E-mini Nasdaq-100 Futures (June): Settled at 13,808.75, down 20.75

U.S. benchmarks started the week in a steady holding pattern, and that was all we could’ve asked for ahead of today’s inflation data. Core CPI came due at 7:30 a.m. CT; data for March was expected to remain tame at +1.5% YoY and +0.2% MoM, and it came in at +1.6% YoY and +0.3% MoM.

In the U.S., the deflationary effects of the pandemic were mostly absorbed in April, although March did recede slightly. This can be seen through Core CPI and Core PCE both slipping by 0.4% MoM in April and only by 0.1% MoM in March of last year. The backbone to the rise in risk assets is, of course, the Federal Reserve’s accommodative policy. 

Fed Chair Powell has continued to emphasize his rhetoric that an acceleration in inflation through the summer is only expected to be transitory due to this base data. Still, we didn't want to see the data run away and bring cause for policy to be reactionary; a read within estimates would continued to support the Fed’s unprecedented, yet patient, policy stance.

Yesterday, the Treasury market absorbed $38 billion in 10-Year Notes at a high yield of 1.68%, allowing for the focus to stay on CPI. Today, the Treasury will auction $24 billion in 30-Year Bonds. Traders and investors must keep a pulse on this complex; any sharp selling today would likely begin to weigh on risk assets. 

Fed speakers will also garner attention. Yesterday, St. Louis Fed President James Bullard surprisingly correlated monetary policy with the pace of vaccinations, saying that the Fed couldn’t even think about tapering until 75% of the population was vaccinated. Analysts believe such a feat could be reached as early as July. 

This morning, the FDA announced they’ll pause the use of Johnson & Johnson’s vaccine due to blood clots. Does this now equate to dovish Fed policy? Regardless of this pace, full employment remains in the Fed’s crosshairs. San Francisco Fed President Mary Daly, a 2021 voter, speaks at 11:00 a.m. CT, along with Kansas City Fed President Esther George, a 2022 voter, and Philadelphia Fed President Patrick Harker, a 2023 voter. Atlanta Fed President Raphael Bostic, a 2021 voter, speaks at 2:15 p.m. CT.

Data from China overnight showed a much tighter trade balance than expected at $13.8 billion versus $52 billion. The number was fueled by robust Imports, jumping by 38.1% YoY versus 21.6% expected, and a soft read on Exports at +30.6% versus 35.5% expected.

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