Monday's Strength Is Just What The Market Needed

May 25, 2021 10:00 AM
It seems that the tough part is now in the rear-view mirror
Supporting the Treasury complex is none other than the Federal Reserve
The U.S. Dollar Index has still forged the lowest level since January 7th
Blue Line Futures Market Update

Blue Line Futures Market Update

Monday's Close

E-mini S&P 500 Futures (June): Settled at 4193.75, up 42.00

E-mini Nasdaq-100 Futures (June): Settled at 13,635.25, up 230.25

Monday was strong and exactly what this market needed to set a course for record highs. The S&P cleared a wall of resistance and, along with the Nasdaq and Dow, they’re all at 2-week highs.

It seems that the tough part is now in the rear-view mirror: a ping-ponging between a floor defined by March’s payroll strength and a ceiling left by the damage of April’s payroll reversal. A key component to tech’s leadership is the rate story; as the Nasdaq and S&P trade at 2-week highs, inversely, the yield on the 10-Year Treasury has trickled to 2-week lows.

Supporting the Treasury complex is none other than the Federal Reserve, whose balance sheet has expanded by $142 billion since April 28th, $92 billion of which came the week ending May 19th. Of course, transitory inflation pressures, a steadfastly dovish rhetoric from Fed committee members, geopolitics, and the reduction of prices in some commodities have all helped. 

Speaking of Fed committee members, in their latest coordinated effort, Fed Governor Lael Brainard, Atlanta Fed President Raphael Bostic, and St. Louis Fed President Jim Bullard all reiterated their patience with such unprecedented policy measures and the transitory inflation narrative yesterday. 

Despite mixed economic data from Germany this morning headlined by a contraction in Q1 GDP, the U.S. Dollar Index has still forged the lowest level since January 7th; the Fed’s in the driver’s seat and this week culminates Friday with the Core PCE Index, their preferred inflation indicator.

Today, S&P House Price Index came due at 8:00 a.m. CT, and followed by the closely-watched Consumer Confidence read at 9:00 a.m. CT. A speech from Fed Governor Randal Quarles, New Home Sales, and Richmond Fed Manufacturing also came due at 9:00 a.m. CT.

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