Dow poised to start week under pressure

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U.S. stocks were indicated lower Monday morning, following the worst week for the three main equity benchmarks in nearly thee months on the back of fears of rising inflation.

How are stock benchmarking trading?
  • Futures for the Dow Jones Industrial Average
    YM00,
    -0.39%

    YMM21,
    -0.39%
    were trading 136 points lower to reach 34,180, a decline of 0.4%.

  • S&P 500 index futures
    ES00,
    -0.36%

    ESM21,
    -0.36%
    were off 15.90 points, or 0.4%, at 4,153.

  • Nasdaq-100 futures
    NQM21,
    -0.53%
    NQ00,
    -0.53%
    were down 70.25 points at 13,316, a retreat of 0.5%.

On Friday, the Dow
DJIA,
+1.06%,
S&P 500
SPX,
+1.49%
and the Nasdaq Composite Index
COMP,
+2.32%
all logged their steepest weekly losses since Feb. 26 and the Nasdaq also booked its lengthiest weekly losing streak, four straight, since Aug. 23, 2019.

What’s driving the market?

Inflation fears continue to plague the market, and investors are looking toward Wednesday’s release of minutes from the Federal Reserve’s most recent meeting to help gauge the central bank’s tolerance for pricing pressures in the aftermath of the COVID pandemic.

“Traders are very much going to be focused on the biggest event of this week: the Fed’s minutes, and they will like to know what the Federal Reserve thinks about the recent U.S. CPI data,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.

A number of Fed members have thus far described those pressures as likely to prove transitory, even after last Wednesday’s read on consumer inflation came in at its hottest rate since 2008. 

Atlanta Fed President Raphael Bostic told CNBC during a Monday morning interview that “now’s not the time to consider moving,” on raising rates or removing Fed accommodation. . Bostic is a member of the rate-setting Federal Open Market Committee this year.

Read: ‘Jammed and distorted’: investors are wrestling with inflation that may test the Fed’s framework

Bostic also is set to talk with Fed Vice Chairman Richard Clarida at Atlanta Fed banking conference at 10:05 a.m. Eastern.

“Remember, the Fed has shown no concerns about soaring inflation for the time being as they believe that the current surge is only temporary,” Aslam wrote.

Ahead of minutes, a reading of manufacturing activity in New York, the Empire State Manufacturing Index, slipped to a reading of 24.3 in May from a more-than-three-year high of 26.3 in April, the New York Fed said Monday. Economists surveyed by The Wall Street Journal expected a reading of 24.8.

See: The stock market is volatile because it’s hard to tell ‘good’ inflation from ‘bad’

Meanwhile, China’s economy showed some evidence of sluggishness in recovering from COVID.

Retail sales rose 17.7% from the pandemic-hit level a year earlier, short of March’s 34.2% pace. On top of that, April industrial production rose 9.8% from a year earlier, slower than March’s 14.1% pace, reported The Wall Street Journal, citing the National Bureau of Statistics. Fixed-asset investment showed a rise of 19.9% in the January-April period, compared with 25.6% in the first quarter.

Those readings come after similar reports for retail sales in the U.S. for April came in flat and a report on U.S. manufacturing output rose 0.7% in April, weaker than economists forecast.

Domestically, equity markets have been underpinned by a brightening outlook for the U.S. economy and corporate earnings, with strategists increasing 2021 earnings estimates at the fastest rate since Donald Trump’s tax-cut plan prompted a reassessment of the outlook for corporate profits, Bloomberg News reports.

Earnings per share for the S&P 500 have risen 5.7% to $183.90 from $174, according to Bloomberg.

The increase underscores a predicament where the economic picture is rosier but jitters around inflation threaten to knock investment markets around for the near term.

In deal activity, AT&T Inc.’s
T,
+0.09%
WarnerMedia and Discovery Inc.
DISCA,
+1.19%
agreed to a $43 billion merger.

Which companies are in focus?
  • Shares of AT&T were up 2.3% in premarket trade after the deal announcement, while those for Discovery surged nearly 10%.



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Written by bourbiza

Bourbiza Mohamed. Writer and Political Discourse Analysis.

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