Morning Notes — CPI and Bond Yields
As previewed, Treasury yields move lower despite this morning’s hotter-than-expected May CPI report.
Morning Notes — Tomorrow
Consensus is looking for headline CPI to be up +0.4% month-over-month and +4.7% year-over-year. Core CPI is expected to be up +0.5% and +3.5%, respectively.
Morning Notes — Catalyst Ahead
May CPI is scheduled for release this Thursday. Year-over-year US CPI accelerated to +4.2% in April from +2.6% in March (both above 2.5%).
Morning Notes — Narrative
Friday’s below consensus Nonfarm payroll print should be an incremental tailwind for the SPX as it helps keep the Fed on track to taper in 2022, rather than pulling it into 2021.
Morning Notes — Market Reaction
The reflex market reaction to the mild payroll disappointment has Treasury yields lower with growth equity sectors outperforming value. But with almost every other report signaling strong end-market demand, today’s reaction is unlikely to have much staying power.
Morning Notes — Catalyst Ahead
Today’s ADP jobs report for May was very strong with private payrolls up +978,000 vs. consensus for +623,000. The correlation between ADP private payrolls (typically precedes the official BLS monthly Jobs Report by two days) is positive, but not strong.
Morning Notes — Jobs
Friday’s release of May Nonfarm payrolls will be the last major employment report into the June 15-16 FOMC meeting. The Fed has recently pointed to a sluggish labor market recovery as a reason to defer conversations about tapering asset purchases.
Morning Notes — Headwinds?
Potential headwinds include: 1) the Fed’s tapering conversation could become an equity headwind if expectations shift forward (consensus looking for a November start). Markets will pay close attention to the June 16 FOMC policy announcement for clues;
Morning Notes — Banks (part 2)
Yesterday, we covered expectations for large cap banks to increase buybacks after June stress test results (late June). The increases should be significant and positive for the group in the near-term, but we prefer smaller regional banks with an ability to give shareholders a return
Morning Notes — Tapering Implications
The new focus on Fed tapering has mixed implications for markets. The near-term implications are net positive as the conversation reduces investor concerns for a Fed policy mistake.