Louis Fed President James Bullard speaks Monday morning. His comments last Friday, that he expects the first rate hike in late 2022, weighed on the equity markets. He also indicated that inflation and growth have come in stronger than the Fed expected, hence the more hawkish rate forecast.
Fed Chairman Jerome Powell speaks on Tuesday and can provide additional information on the Fed’s outlook on the economy and policy.
The big event will be the two-day (Tuesday and Wednesday) FOMC meeting followed by a press conference with Fed Chairman Jerome Powell. His comments will be closely watched to see how the Fed responds to the significantly higher inflation reports and whether or not they still view inflation as transitory. Market watchers will also look for a hint at a schedule when the Fed might begin tapering bond purchases.
Consumer prices (CPI) will be released on Thursday and will be the primary focus. Both the overall and core readings are expected up 0.4% for the month May, and 4.7% and 3.4% year-over-year respectively. That comes after a very strong gain in April. The Fed maintains its stance that inflation is “transitory,” but market participants are concerned about longer term implications and what these numbers might mean for Fed policy.
The May employment report will be closely watched when it is released on Friday. 674,000 new jobs are expected after last month’s disappointing 266,000 payrolls. That was about a quarter of what was predicted from the consensus forecast of economists. Two consecutive months of poor jobs reports could make the equity markets nervous.
The Fed’s Beige Book report on economic conditions is expected Wednesday,
This week will feature the virtual CoinDesk Consensus conference, which “unites professionals across the globe for an immersive virtual experience aimed at exploring the evolution of cryptocurrency and blockchain technology.” High profile speakers include the Fed’s Lael Brainard, ARK Invest’s Cathie Wood, and Bridgewater’s Ray Dalio.
The Fed’s preferred inflation measure, the personal consumption expenditures price index,
Retail sector earnings will be in focus after last Friday’s report that retail sales for April were unchanged following a 10.7% increase in March. This week will feature earnings reports from household names Walmart, Lowe’s, Home Depot, and Target. The weak April employment report has investors cautious on the recovery and any forward guidance in these reports will be closely parsed.
The economic calendar is headlined by April’s Consumer Price Index report on Wednesday. The monthly gain is expected at 0.2% with the “whisper” numbers higher. On a year-over-year basis CPI is expected at 3.6%, which will add fuel to the inflation conversation.
Gas prices will be in focus this week as futures jumped more than 4% after a cyber-attack shut down a key east pipeline.
The Institute for Supply Management (ISM) manufacturing survey will be released Monday morning. The consensus estimate is for an overall reading of 65, which would be the highest since the early 1980s. The prices paid component is also expected to be strong (consensus estimate 86.1), which would further fan inflation concerns.
Other key reports include factory orders (Tuesday),
There is important data to keep an eye on this week, including GDP, durable goods orders, pending home sales, and the Fed’s favored inflation measure, the personal consumption expenditures deflator. The data is expected to confirm a robust period for the economy and higher inflation. First quarter GDP is expected at 6.9% with estimates ranging as high as 8.5% to 9%.
Most major cryptocurrencies were under pressure on Sunday (April 18) just days after the IPO of Coinbase Global. Bitcoin and Ether dropped as much as 15% and 18%, respectively. Federal Reserve Chairman Jerome Powell last week said Bitcoin “is a little bit like gold” in that it’s more a vehicle for speculation than making payments. (Source: Bloomberg)