The next major data point for the Federal Reserve is the report on consumer prices, which is due on April 12.[0] The release is expected to play a major role in determining the upcoming Fed outlook. The US FOMC minutes, CPI, and BoC announcement are expected on Wednesday.[1] The market is currently pricing in roughly 66% odds of a 25 bps rate hike, with the switch taking place after Friday’s non-farm payrolls data.[2]
Despite geopolitical, banking, and inflation fears, major US indexes continue to climb and entered Tuesday on a four-day winning streak. Fear may have dissipated from the market as the worst-case scenarios have yet to materialize, potentially increasing the demand for high-risk assets.[3]
Although the price of crude oil continued to rise following OPEC’s unexpected production cut announcement, small gains were made during a calm overnight session.[4] Early yesterday, the prices of Crude Oil WTI Futures surged, but the gains were not sustained, leading to confusion among analysts who anticipate a surge in demand from China as it reopens.[4]
Something to keep in mind is that much of the SPX’s gains in Q1 came courtesy of a handful of very large stocks that can have outsized influence on the index due to their heavy weighting.[4] The 10 largest stocks in the SPX were responsible for 90% of the index’s Q1 increase, with the triumvirate of Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) contributing more than 50%.[3]
The U.S. Dollar Index ($DXY) slipped to 102.02, while the Cboe Volatility Index® (VIX) futures edged up to 18.82.[4] The price of WTI Crude Oil (/CL) increased to $81.14 per barrel.[4]
It could be assumed that OPEC is knowledgeable in their actions.[4] When we take into account the cartel’s unexpected reduction in crude production during the weekend, and couple it with the latest data releases on Monday indicating ongoing challenges for two of the major global economies, we could potentially conclude that this is the main message to be gathered.[4] Separate reports have shown that manufacturing activity in both the U.S. and China fell short of expectations, leading to speculation that a decrease in demand for manufactured goods may also result in reduced crude oil demand.[4]
The ongoing investor meeting of Walmart (WMT) has shifted attention to any remarks made by company executives regarding their present fiscal quarter, particularly after the company’s February announcement of weak guidance. The meeting will continue today and tomorrow.[4] At that time, the corporation indicated that the possibility of high prices and sluggish demand for non-essential products could pose challenges.[4] Other retailers like Home Depot (NYSE:HD) concurred in their own earnings reports at the time.[4]
In conclusion, the market is closely watching the upcoming report on consumer prices, which is expected to play a major role in determining the upcoming Fed outlook. Despite fears, major US indexes continue to climb, and OPEC’s surprise cut to crude production has raised some questions. Walmart’s investor meeting will also be closely watched for any observations on the company’s current fiscal quarter.[5]
0. “Asia Stocks Trim Gains as Traders Mull Fed’s Path: Markets Wrap” Yahoo Finance, 10 Apr. 2023, https://finance.yahoo.com/news/currencies-tight-ranges-us-futures-223339208.html
1. “Newsquawk week ahead: Highlights include US CPI, Retail Sales, FOMC Minutes, BoC” ForexLive, 8 Apr. 2023, https://www.forexlive.com/centralbank/newsquawk-week-ahead-highlights-include-us-cpi-retail-sales-fomc-minutes-boc-20230408
2. “A reminder that most markets are still closed today” ForexLive, 10 Apr. 2023, https://www.forexlive.com/news/a-reminder-that-most-markets-are-still-closed-today-20230410/
3. “JOLTS Ahead, Payrolls on Friday: Investors Turn Back to the Employment Picture” The Ticker Tape, 4 Apr. 2023, https://tickertape.tdameritrade.com/market-news/jolts-ahead-payrolls-on-friday-investors-turn-back-to-the-employment-picture-19439
4. “Payrolls on Friday: Investors Turn Back to the Employment Picture” Investing.com, 4 Apr. 2023, https://www.investing.com/analysis/payrolls-on-friday-investors-turn-back-to-the-employment-picture-200636915
5. “Stock Futures Turn Higher During Short Window Of Trading After Jobs Report” The Wall Street Journal, 7 Apr. 2023, https://www.wsj.com/livecoverage/stock-market-news-today-04-07-2023/card/stock-futures-turn-higher-after-jobs-report-7sgRg5N79Ri9GYdBAZKa