Shares narrow to kick-off earnings week, while Powell says US economy is “turning point”

How are the benchmarks performing?

• Dow Jones Industrial Average DJIA,
  -0.27%
  decreased 87 points to trading close to 33,714, a decrease of 0.3%.

• S&P 500 SPX Index,
  -0.20%
  gave up 9 points, or 0.2%, to 4,120.

• Nasdaq Composite,
  -0.54%
  decreased by 80 points to about 13,820, a decrease of 0.6%.

On Friday, the S&P 500 rose 2.7% weekly, the Dow rose 2% and the Nasdaq Composite rose 3.1% weekly. The S&P 500 and Dow booked their third consecutive weekly gain, while the Nasdaq climbed for two weeks in a row.

What drives the market?

On Sunday, Powell said the economy will begin to grow strongly in the second half of the year, but stressed that this recovery should not lead anyone to believe that the central bank will accelerate interest rates in 2021.

“I think we’re unlikely to raise rates like this year,” Powell said during a “60-minute” interview that was recorded Wednesday at Fed headquarters and aired Sunday night.

Read: Wall Street comes in handy with a Fed that will do what it says

The Fed chief said the economy “seems to be at a turning point”, with strong growth following “right now” and the weakness caused by the coronavirus pandemic in the rearview mirror.

Powell’s comments come as Wall Street positions itself for the start of first-quarter corporate earnings, which could provide additional clues as to whether one of the market’s biggest fears is: a too-hot economy and rising inflation. which forces decision-makers to substantially increase tariffs and calls for accommodative policies sooner than expected.

So far, Fed officials have said they expect a rise in inflation to be transitory and have repeatedly said they will be focused on ensuring the labor market makes a full recovery before considering the easing policy. .

As the earnings season begins, “I’m waiting to see how the market reacts,” said Keith Lerner, chief market strategist for Truist Advisory Services. “Many have been evaluated and the market is looking for gains to confirm that this is the right action. The obstacle rate for positive surprises has increased. ”

Lerner believes the Fed will remain “supportive” and even if bond yields rise, the market should absorb the next bit higher, as long as it is not too steep.

“We had a gradual but steady movement, with low volatility toward new highs,” Lerner said in an interview. “I still think the primary market trend is higher, but as we move towards gains, I suspect we are starting to trade a little more at a distance. When the main trend is bigger, you don’t want to worry about hiccups. ”

Some strategists fear, however, that stock valuations remain high, despite uncertainties including inflation and the tax regime.

Shares ended mostly at record highs last week, and the Nasdaq Composite, after entering correction in March – defined as a drop of at least 10% from a recent high – is less than 2 % since its closure on 12 February. Earnings for stock benchmarks came despite concerns about out-of-control inflation and the possibility for President Joe Biden to raise the corporate tax rate to 28% from 21% to fund his infrastructure proposal of 2, 4 trillion dollars.

“The investment community is too optimistic in our opinion, it shows no concern for the plausible tax increase being proposed by the Biden administration,” Citigroup research analysts Tobias Levkovich, Lorraine Schmitt and Jennifer Stahmer wrote in a research note dated 7 April.

“Indeed, all developments are perceived as positive news. However, such unilateral views are not usually a good starting point, “Citi researchers wrote.

Meanwhile, Germany was preparing new legislation inspired by COVID, which would allow the largest eurozone economy to impose national restrictions without the approval of the regional government. Meanwhile, England has reopened outdoor drinking pubs and hairdressers.

See: The biggest “inflationary fear” of the last 40 years is coming – what stock market investors need to know

Which companies are concentrated?

• Actions of Nuance Communications
  NUAN,
  + 17.13%
  increased by over 16% months after Microsoft Corp.
  MSFT,
  + 0.46%
  confirmed that it will buy the artificial intelligence company for about $ 16 billion.

• Regeneron Pharmaceuticals
  RAIN,
  -0.45%
  said Monday that it will ask the Food and Drug Administration to expand the use of its antibody drug among people exposed to the virus who have not yet been vaccinated, suggesting potential new preventive applications for the drug, which is already being used to treat COVID -19 cases. Shares fell 0.4%.

• Uber Technologies Inc.
  UBER,
  + 3.66%
  shares were up 3.3% after the company said on Monday morning that global gross bookings had reached the highest monthly level in the company’s history in March.

• Actions of Ingersoll-Rand Inc.
  IR,
  -0.76%
  were virtually unchanged Monday morning after the diversified industrial company announced a deal to sell Club Car for about $ 1.7 billion.

How are other assets doing?

• US Dollar ICE Index, DXY,
  -0.07%
  a measure of the currency against a basket of six major rivals fell 0.1% to 92.07.

• US gross CL.1,
  + 1.35%
  for May delivery CLK21,
  + 1.35%
  it gained $ 1.32 or 2.2% to trade nearly $ 60.64 a barrel on the New York Mercantile Exchange, after losing 3% last week.

• The 10-year treasury bill produces TMUBMUSD10Y,
  1.676%
  gained 1.5 basis points to trade almost 1.676% before a busy week for the bond market. Bond prices are reversing yields.

• Gold futures contracts declined with the June GCM21 contract,
  -0.58%
  $ 9.90 or 0.6% lower, up to $ 1,734.90 an ounce on Comex.

• In Europe, the Stoxx 600 SXXP index,
  -0.40%
  was 0.4% lower, while the FTSE 100 UKX in London,
  -0.35%
  decreased by 0.3%.

• In Asia, Shanghai Composite SHCOMP finished 1.1% less, Hong Kong’s Hang Seng HSI closed down 0.9%, and Japan’s Nikkei 225 NIK lost 0.8%.