- US futures and global stocks slipped as investors prepared for a busy week of data and earnings.
- Inflation data and bond auctions in the US have the potential to send Treasury yields higher.
- Major companies start to report quarterly earnings, kicking off with the Wall Street banks.
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US futures slipped on Monday, as investors braced themselves for a busy week of economic data, company earnings and government bond sales, and digested Federal Reserve Chairman Jerome Powell’s comments that the US economy is at an “inflection point.”
US stocks rose solidly in the week to Friday as bond yields fell, with the S&P 500 climbing 2.71% as tech stocks got a boost. Lower yields, which move inversely to prices, have helped the US’s giant tech stocks look like attractive investments during the COVID-19 crisis.
But analysts say bond yields have the potential to kick higher over the coming days in the wake of consumer inflation data due on Tuesday and three US bond auctions across the week.
Consumer price index inflation data is due on Tuesday, with economists polled by Reuters expecting a jump to 2.5% from 1.7% year on year in February.
Producer price inflation rose at the fastest rate in more than 9 years in March, data showed Friday, hitting 4.2% year on year.
The sale of 3-, 10-, and 30-year US government bonds could also unnerve the market if demand is low.
“I have suspected that the US yield story had not gone away,” Jeffrey Halley, senior market analyst at Oanda said. “This week’s data calendar will give plenty of ammunition to prove me right or wrong.”
Bond yields slipped on Monday, however, with the key 10-year US Treasury note yield down 1.1 basis points to 1.655%.
The dollar index was up 0.09% to 92.25.
Investors were also weighing up Fed Chair Jerome Powell’s latest comments.
The head of the world’s most powerful central bank said in an interview with CBS, which aired on Sunday, that the US is at an “inflection point” and is likely to see a boom in growth and hiring, but still faces threats from COVID-19.
“The outlook has brightened substantially,” he told CBS’s “60 minutes.” Yet he said there was a risk that coronavirus starts spreading again.
Another round of major company earnings is also set to begin, with Wall Street titans Goldman Sachs, JPMorgan, and Wells Fargo due to report on Wednesday.
Deutsche Bank analysts said in a note they expect S&P 500 earnings to come in 7.5% above consensus. That would be lower than the last 3 quarters, but still well above the historical average of a 4% beat.