Stocks traded mixed on Monday, with technology stocks under more pressure as investors took the risk that higher inflation during the Pandemic recovery might weigh on high-growth names.
The Dow will increase more than 150 points or 0.5% in order to reach a new all-time high after the opening bell.The Nasdaq dipped, declining some of Friday's gains.The S&P 500 was little changed.
Treasury yields were roughly the same across the long end of the curve, with the benchmark 10-year yield standing below 1.59%.West Texas Intermediate crude oil prices and gasoline futures gained after the Colonial Pipeline, a top fuel pipeline operator, cut off its fuel lines after a cyberattack.
The Ethereum token, built on the Ethereum Blockchain, set an all-time high of more than $4,000, building on a rally that has doubled prices for the second-largest cryptocurrency since April.The Bitcoin prices edged slightly lower, hovering below $58,000.
Investors have been focused on the prospective of inflation during the economic recovery following the coronavirus pandemic, with a surge in demand during reopenings likely to drive a drop in prices.This would ultimately force the Federal Reserve to tighten its policies, and taken together, this would risk weighing on the valuations of longer-term growth stocks like those of technology companies.
Friday's sharply disappointing job report at least temporarily assuaged traders' concerns, with the miss seen as fueling the policymakers' claims that a full economic recovery remains a ways off.But inflationary concerns, due to higher commodity prices and a series of major companies cited rising input and end user prices due to supply and demand mismatches, will remain a key theme for investors in the coming months.
The April Consumer Price Index due out on Wednesday and Producer Price Index on Thursday will show the latest dramatic price change for consumers and suppliers, with both indexes expected to show a marked jump from the last year's pandemic-depressed levels as demand resurges during the recovery.
Before the pandemic, monthly CPI releases usually passed without much comment.They will be scoured for any evidence of a post-pandemic jump in inflation, wrote Neal Shearing, Group Chief Economic for Capital Economics, in a note Monday.He said investors should stay on the watch for three main themes in these reports and other near-term data.
The first is evidence of what might be termed "opening up" inflation.This is likely to be the case for goods and services for which there is a surge in demand as restrictions are lifted such as hotels, restaurants, airfares and clothing, he said.The extent of pent-up demand in these areas means that supply can still struggle even at the best times to keep pace.
The second is evidence of 'opening up' inflation, he added, with emphasis on his.Some goods, including IT equipment and groceries, saw sharp increases in prices and demand as people were forced to stay at home.It follows that these components should see the reverse of a reopening of inflation on the market.
The next area to watch is evidence of commodity-related inflation.Shearing said that the oil prices had recovered from their slump at the start of the pandemic and Metal and grain prices have rebounded much above the pre-pandemic levels.These developments are already boosting inflation and will continue to do so in the near term.The extent to which they exert downward pressure on inflation beyond the next six months or so will depend on whether the increase in commodity prices is sustained.
3 : 02 p.m.AT: Inflation concerns may spark 'Freak-out' moments for stocks, but this will likely be a buying opportunity: Strategist
Market participants who closely watch prospects for a rise in inflation could see a pullback at signs of surging prices.According to at least one strategist, however, any inflation-driven selloff in the market would likely present a solid investment opportunity in an otherwise attractive backdrop for stocks.
I think what we are all debating is will inflation actually be increasing, Jim Watson told Yahoo Finance on Monday, and then the market takes a step back, after Invesco originally announced an inflation strategy.We've seen what the other world looks like, where the five-year rates go up, the dollar strengthens, stocks sell off some and eventually we assess whether the Fed is going to go ahead with the tightening plan or is it just a matter of market does the Fed work, maybe we get a correction.
I'm still very much cognizant that we are in the very early stages of this cycle, he added.This cycle will play out over a long period of time.The Fed is not going to be lowering rates and inverting the yield curve for years to come.And so an inflation that's likely to emerge in the summer could create what we'd call a so-called 'freak-out' moment in the market, but would represent a buying opportunity.
1: 19 p.m.Nasdaq gives in trading losses, dropping more than 1.4%?
Here's where the markets were trading on 01 : 20 p.m.In New York: What's ET!
11: 37 a.m.According to Morgan Stanley, there are now two major concerns for equity investors.
According to the strategists from Morgan Stanley, stocks are likely to start to see diminishing returns from optimism over the post-pandemic economic recovery.
Instead of getting excited about the reopening, we are getting more concerned about execution risk and what's already figured out, said Michael Wilson in a note Monday.First, on the execution front, there's growing evidence that demand remains a problem for many companies, just as supply is picking up.These issues have been particularly acute in certain materials and components, and now it has become more evident that we have labor shortages as well.
The risk of valuation is too elevated, he added.But with this liquidity still in the bank and the S&P 500 capturing new highs every day, many seem worried.The weak payroll number just means more accommodation from the Fed, or at least not a withdrawal any time soon.From our perspective, the equity risk premium is underpricing these cost supply issues as well as the other risks we have discussed over the past month.
10 : 08 a.m.E: Positive market reaction to the Friday jobs report came because '' the party keeps with Fed liquidity: Strategist
Friday's jobs report — which showed an unexpected 266,000 payroll gains and an unexpected move up in the unemployment rate — resulted in a positive market reaction, with Dow and S&P 500 setting new highs despite the disappointing data.
According to many strategists, these moves came as weak data appeared to strengthen the Federal Reserve's position to keep monetary policy accommodative at least in the near-term.
It's mainly because'The party, if you will, pressed JJ Kinahan, chief market strategist for TD Ameritrade, on Monday of the market reaction to the report.And by that I mean, the Fed continuing to raise liquidity in the system, but not talking about raising rates in the short term because there's not the pressure on wages that many had expected.
You didn't realize that leisure and hospitality industry created more jobs than the whole report did in particular.I want this to continue, he added.
We have such differences from what the states are doing, from some that are wide open to others that are talking about coming out of some of the restrictions next month, said Kinahan.It's very difficult to predict at what point these bars and restaurants, particularly hotels, have people on the payroll.
Here's where the markets traded after the opening bell from Monday morning:
7 a.m. -- 54 a.m.Marriott shares dip after posting Q1 earnings that missed estimates, though company's 'leisure demand gained momentum.
Marriott posted mixed first-quarter results Monday morning, with revenue down by more than half over the past year as lodging demand remained pressured by the pandemic.
First-quarter adjusted earnings were $10 per share on revenues of $2.32 billion, a 51% drop on the top line.According to Bloomberg data, Consensus analysts were seeking for 2.99 million in sales.Due to COVID-related uncertainty, the company declined to provide guidance.
Revenue per room, a closely watched measure of efficiency in the hotel industry, dropped in the first three months of 2021 to more than double the prior year's 22.5% decline.The drop was most pronounced in China, while the trend in the U.S. and Canada registered for a rebound, the company said.
While the recovery trajectories vary from region to region, the resiliency of demand has been evident most strongly in mainland China where the occupancy is near the pre-pandemic level.In March, occupancy reached 66% in mainland China, almost the same as in March 2019 on strong demand from both business travelers and leisure travelers, said Marriott CEO Tony Capuano in a press statement.
In our largest region - the U.S. and Canada - Canada, demand accelerated as vaccine rollouts increased, he added.The year started with 33% in December and by March 49% was reached.The demand for leisure has gained momentum, particularly in ski and beach resort destinations.
7: 21 a.m.ET: Stock futures point to a higher open of the financial market.
Here's where the markets could be trading before the opening bell was rung:
Emily McCormick is a reporter for Yahoo Finance.Follow her on twitter: emily mcck
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