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May MMT: Fundamental Improvement But What’s Next?

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What’s in Today’s Report:

  • May Market Multiple Table: Fundamental Improvement But What’s Next?

Futures are lower amid “risk-off/war-on” money flows (oil and yields higher) with no reported progress towards a U.S.-Iran ceasefire ahead of key U.S. inflation data today.

Economically, German CPI met estimates at 2.9% Y/Y while the U.S. NFIB Small Business Optimism Index was little changed at 95.9 vs. (E) 96.1 in April, however the data is not materially moving markets with geopolitics remaining in focus.

Looking ahead to today’s session, the U.S. CPI (E: 0.6% m/m, 3.8% y/y) and Core CPI (E: 0.3% m/m, 2.7% y/y) release will be one of the more important domestic data points released this week, and if the number comes in hot, a sharp rise in yields could weigh heavily on stocks.

Additionally, there is one Fed speaker to watch: Goolsbee (1:00 p.m. ET) and a 10-Yr Treasury Note auction at 1:00 p.m. ET, both of which have the potential to impact bond markets and influence equity price action today.

Finally, a few earnings reports to watch today include SE ($0.70), JD ($0.43), and QBTS (-$0.10). As has been the case this earnings season, the better the quarterly results, the better in this market environment.

 

Are Stagflation Risks Rising?

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What’s in Today’s Report:

  • Stagflation Risks Rising

Futures are slightly higher as investors weigh the prospects of an emergency oil reserve release by G7 members against news that Iran attacked multiple oil tankers overnight ahead of key U.S. inflation data.

Economically, German CPI held steady at 2.0% vs. (E) 2.0% in February which is serving to ease global inflation worries.

Looking into today’s session, domestic inflation data will be in focus early with CPI (E: 0.3% m/m, 2.4% y/y) and Core CPI (E: 0.2% m/m, 2.5% y/y) due to be released ahead of the bell. Additionally fresh insight regarding the state of the U.S. fiscal situation will be delivered in the afternoon with the release of the Treasury Statement (E: $-308.0B).

There is one Fed speaker scheduled to speak today: Bowman (8:30 a.m. ET) and investors will be looking for any signs of caution regarding rate cuts due to the still tense geopolitical backdrop in the Middle East and the subsequent impact on oil prices/inflation.

The Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 10-Yr Note auction at 1:00 p.m. ET, the latter of which will be closely watched as a proxy for any shift in the growth/inflation outlook by bond investors in recent weeks.

Finally, there are a few earnings releases to watch today including CPB ($0.57), PATH ($0.12), and WOOF ($-0.02), however, the market’s primary focus will remain geopolitical headlines which have proven to be meaningful intraday catalysts this week. Any signs of a sooner-than-later end to the U.S.-Iran military conflict will be well received and support a further relief rally in risk assets.