Stocks start back to start earnings week as Powell says US economy is ‘turning point’

How are the stock positions?

• The Dow Jones Industrial Average DJIA,
  -0.20%
  decreased 87 points to trade near 33 714, a decrease of 0.3%.

• The S&P 500 Index SPX,
  -0.17%
  gave up 9 points, or 0.2%, at 4,120.

• The Nasdaq Composite COMP,
  -0.52%
  decreased 80 points to about 13,820, a decrease of 0.6%.

On Friday, the S&P 500 posted a weekly gain of 2.7%, the Dow rose 2% and the Nasdaq Composite recorded a weekly gain of 3.1%. The S&P 500 and the Dow made their third weekly gains, while the Nasdaq climbed two weeks in a row.

What drives the market?

Powell said Sunday that the economy will grow strongly in the second half of the year, but stressed that the setback should not make anyone believe that the central bank would raise interest rates in 2021.

“I think it’s unlikely that we’ll raise rates like this year,” Powell said during the ’60 Minutes’ interview recorded at the Fed’s headquarters on Wednesday night.

Read: Wall Street gets a Fed under control who will do what he says

The Fed chief said the economy was ‘apparently on a turning point’, with strong growth being ‘now’ and the weakness caused by the coronavirus pandemic in the rearview mirror.

Powell’s remarks come as Wall Street wants to position the start of the first quarter’s corporate results, which could provide further clues as to whether one of the biggest fears in the market is coming to fruition: a hot economy and a boom in inflation which forces policymakers to raise rates significantly and resets accommodative policies sooner than expected.

So far, Fed officials have said they expect a rise in inflation to be short-lived and have repeatedly said they will focus on ensuring the labor market fully recovers before easing policy.

As the earnings season begins, “I’m waiting to see how the market responds,” said Keith Lerner, chief market strategist at Truist Advisory Services. ‘Many have been priced in and the market is looking for earnings to confirm that this is the right move. The hurdle 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 leg higher, as long as it is not too steep.

“We’ve moved a lot of gradual, but steady, low volatility to new highs,” Lerner said in an interview. ‘I still think the primary market trend is higher, but as our earnings increase, I suspect we’ll start trading a little more exchange rate. If the primary trend is higher, you do not want to worry about the hiccups. ”

However, some strategists fear that stock valuations will remain high despite uncertainties that include inflation and the tax regime.

Stocks ended mostly on records last week and the Nasdaq composite, after falling into correction in March – defined as a drop of at least 10% from a recent high – is less than 2% of its everyday high at 12 February. The gain for equities measures came despite concerns about out-of-control inflation and the possibility that President Joe Biden would raise the corporate tax rate from 21% to 28% to fund his $ 2.4 billion infrastructure proposal.

“In our opinion, the investment community is too excited and shows no concern about the possible tax increases proposed by the Biden government,” Citigroup research analysts Tobias Levkovich, Lorraine Schmitt and Jennifer Stahmer wrote in a April 7 research note. .

‘All developments are indeed seen as positive news. Yet such one-sided views are usually not a good starting point, ‘the Citi researchers wrote.

Meanwhile, Germany was preparing new COVID-inspired legislation that would allow the eurozone’s largest economy to impose national restrictions without the approval of local government. England, meanwhile, has reopened pubs for outdoor drinking and hairdressers.

See: The biggest ‘inflation scare’ in 40 years – what stock market investors need to know

Which companies are in focus?

• Shares of Nuance Communications
  NUAN,
  + 17.16%
  rose more than 16% on Monday Microsoft Corp.
  MSFT,
  + 0.23%
  confirmed that he would buy the artificial intelligence company for about $ 16 billion.

• Regeneron Pharmaceutical Products
  RAIN,
  -1.03%
  said on Monday that it would ask the Food and Drug Administration to expand the use of its antibody products among people who have been exposed to the virus and who have not yet been vaccinated, indicating possible new preventive applications for the drug, which are already used to treat COVID. -19 cases. Shares fell 0.4%.

• Uber Technologies Inc.
  UBER,
  + 3.95%
  Shares were up 3.3% after the company said Monday morning that overall gross discussions had reached their highest monthly level in the company’s history in March.

• Shares of Ingersoll-Rand Inc.
  IR,
  -0.59%
  was virtually unchanged yesterday morning, after the diversified industrial company announced an agreement to sell Club Car for about $ 1.7 billion.

How are other assets doing?

• The ICE US Dollar Index, DXY,
  -0.02%
  a measure of the currency against a basket of six major competitors, fell by 92% by 92%.

• U.S. crude CL.1,
  + 1.57%
  for delivery in May CLK21,
  + 1.57%
  Gained $ 1.32 or 2.2% to trade near $ 60.64 a barrel on the New York Mercantile Exchange, after losing 3% last week.

• The ten-year treasury return TMUBMUSD10Y,
  1,680%
  gained 1.5 basis points to trade near 1.676% before a busy week for the bond market. Bond prices move inversely to yields.

• Gold futures have declined, with the June contract GCM21,
  -0.68%
  $ 9.90 or 0.6% lower, to $ 1,734.90 per ounce on Comex.

• In Europe, the Stoxx 600 index is SXXP,
  -0.43%
  was 0.4% lower, while London’s FTSE 100 UKX,
  -0.30%
  decreased by 0.3%.

• In Asia, the Shanghai Composite SHCOMP ended 1.1% lower, Hong Kong’s Hang Seng HSI closed 0.9% and the Japanese Nikkei 225 NIK 0.8%.