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The Friday Market Minute

  • Global stocks power higher, with Wall Street on pace for its sixth monthly gain of the last seven, as investors react to solid corporate earnings and reports of a $6 trillion budget proposal from President Joe Biden.
  • Inflation concerns remain elevated, however, as fund mangers move billions into cash and gold amid rising consumer price gauges, with the Fed’s preferred measure set for release later this morning. 
  • Benchmark 10-year note yields hold at 1.611% in overnight trading while the dollar index added 0.14% to trade at 90.095.
  • CDC data shows 132.7million Americans have now been fully vaccinated against the coronavirus, with around 290.7 million doses administered as of Wednesday.
  • U.S. equity futures suggest a solid open on Wall Street ahead of April PCE Price index data at 8:30 am Eastern time.

U.S. equity futures powered higher again Friday, setting up Wall Street for its sixth gain of the past seven months, as investors react to another impressive slate of corporate earnings and reports of a $6 trillion budget proposal from President Joe Biden while awaiting a key reading of inflation from the world’s hottest economy.

The New York Times reported Thursday that Biden’s budget plans, which will be made public later today, call for around $6 trillion in spending for 2022 — and trillions more beyond that — in what would amount to the largest spending increase since the Second World War. 

While certainly positive for stocks, and broader growth prospects, the injection of trillions more in cash into an economy already awash with liquidity (the Federal Reserve is quietly mopping up billions each day with so-called reverse repos that are simultaneously holding down market interest rates) has investors increasing concerned about the pace of inflation and its impact on asset prices.

They could be further rattled later this morning by the release of the Fed’s preferred inflation gauge — the PCE Price Index — which is expected to show the fastest annual rate of increase since at least the early 1990s.

Should investors — and the Fed — hold their nerve if the core PCE index runs too hot, stocks could certainly move higher as  investors look to an historic second quarter earnings season and the ongoing economic re-opening fueled by the success of vaccine rollouts around the country. 

Curiously, however, data from Bank of America this morning suggests that while this week notched the fourth largest inflow into global stocks since 2012, $68 billion was also moved into cash (the largest move in more than a year) and $2.6  billion in to gold, suggesting at least a hint of concern on the inflation front.

Oil prices reflected another aspect of that concern, with Brent crude rising closer to $70 a barrel in overnight trading and WTI gaining 26 cents to $67.11 per barrel amid a seven-day rally that’s added 8% to the main U.S. contract.

Nonetheless, better-than-expected earnings from a host of companies last night has Wall Street in a bullish mood on the final trading day of the month, with futures contracts tied to the Dow Jones Industrial Average indicating a 170 point opening bell gain and those linked to the S&P 500, which is up just 0.47% for the month, priced for a 14 point advance.

Tech stock gains look a bit more muted, however, with the Nasdaq Composite indicating a 55 point gain as benchmark 10-year Treasury noted yields hold at around 1.611% in overnight trading at the dollar index continues is recent run of modest gains following the four month lows it reached earlier in the week. 

Stocks to watch Friday include  (CRM) – Get Report, which beat Street forecasts for its first quarter earnings, and boosted its full year sales outlook in what CEO Marc Benioff called the best report in the company’s history. shares were marked 4.7% higher in pre-market trading to indicate an opening bell price of $236.50 each. 

Gap Inc.  (GPS) – Get Report shares were also active, falling 1.3% to $34.70 each, in a typical market reaction to better-than-expected results from the retail sector as the apparel group lifted its full-year forecast for sales and profits under new CEO Sonia Syngal.

Beyond Meat  (BYND) – Get Report is back on the rise, as well, as the plant-based food group finds its way into the r/wallstreetbets universe — largely at the behest of TheStreet’s founder, Jim Cramer — with shares up 3.3% to $147.30 the highest since mid-March. 

In Europe, stocks hit a fresh record high as the single currency eased in the wake of a firmer U.S. dollar and investors bet on the upside impact of Biden’s $6 trillion budget proposal, with the Stoxx 600 benchmark rising 0.5% and Germany’s trade-focused DAX index gaining 0.55%.

Overnight in Asia, Japan’s Nikkei 225 surged 2.1% to close at 28,149.41 points, thanks in part to the re-purchase of stocks sold during the final day of yesterday’s MSCI index rebalancing, while the regional MSCI ex-Japan benchmark added 0.5%.