Futures Drop, Yields Rise After Inflation Surprise: Markets Wrap
(Bloomberg) — U.S. equity-index futures extended losses after a report showed inflation rose more than forecast, adding to concern that price pressures will stifle a recovery in the world’s biggest economy.Contracts for the tech-heavy Nasdaq 100 spiked lower, while those for the benchmark S&P 500 also slumped. The dollar remained higher, while Treasury yields rose after the consumer price index increased 0.8% from the prior month after a 0.6% gain in March. Excluding the volatile food and energy components, the so-called core CPI rose 0.9% from March.“The CPI data point feeds into a myopic narrative that the US is overheating and the Fed is one step away from tightening,” said Mike Bailey, director of research at FBB Capital Partners. “Bears will feast on this tightening theme in the short term, but my sense is inflation will prove fleeting and markets will revert back to a more bullish view of moderate growth and lower risk of Fed tightening until we get to a full recovery.”European stocks rose earlier, lifted by optimism about economic re-openings and booming commodities.Debate over whether inflation will be persistent enough to force the Federal Reserve to tighten policy sooner than current guidance suggests comes as abundant stimulus has powered a rally in global equities, raising concerns valuations had become expensive. The year-on-year comparison of consumer inflation was amplified by the shock of Covid-19 shutdowns in 2020.Yet a chorus of Fed officials have stepped in to reassure investors that the U.S. recovery still faces risks, and it’s premature to discuss pulling back monetary support.“With inflation numbers coming in even higher than expected — even taking into account base effects — it’s going to have the market re-evaluating its view on rates,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “The bond market has been surprisingly sanguine about rising inflation pressures and eventually it’s going to have to acknowledge that current rates are too low.”Policymakers have indicated they’re ready to tolerate inflation overshoots to foster a recovery from the pandemic in which job creation will be key. And with the latest data on labor growth significantly undershooting forecasts, their resolve may only have hardened.Copper and iron ore were on course for new records amid a broadening commodities boom. Oil was steady above $65 per barrel. The biggest U.S. pipeline is still closed in the wake of a cyberattack, leading to acute fuel shortages in some parts of the nation.MLIV’s Question of the Day: How Priced In Is a European Reopening?These are some of the main moves in markets:StocksFutures on the S&P 500 fell 0.7%, falling for the third straight day, the longest losing streak since March 4 as of 9:02 a.m. New York timeFutures on the Nasdaq 100 fell 1.4%, falling for the third straight day, the longest losing streak since May 5Futures on the Dow Jones Industrial Average fell 0.4%, falling for the third straight day, the longest losing streak since March 4The Stoxx Europe 600 rose 0.3%The MSCI World index fell 0.2%, falling for the third straight day, the longest losing streak since March 4CurrenciesThe Bloomberg Dollar Spot Index rose 0.1%, more than any closing gain since May 4The euro was little changed at $1.2136The British pound was little changed at $1.4141The Japanese yen slipped 0.3%, more than any closing loss since April 30BondsThe yield on 10-year Treasuries advanced three basis points, more than any closing gain since April 27Germany’s 10-year yield advanced two basis points, climbing for the sixth straight day, the longest winning streak since Feb. 8Britain’s 10-year yield advanced one basis point to 0.85%CommoditiesWest Texas Intermediate crude rose 1%, climbing for the fourth straight day, the longest winning streak since April 15Gold futures rose 0.2% to $1,840 an ounceFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.