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Nasdaq fell from the top after a series of economic reports

2021-06-15 22:08

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2021-06-15 22:08

Nasdaq fell from the top after a series of economic reports
come in. Miro Frelick Photography / / stock struggle

It could have been a big day on Wall Street. The day before the Fed’s statement was released and on the day it published a series of important macroeconomic reports, the Nasdaq fell from its peak set the day before.

The Nasdaq index fell 0.71 percent to 14,072.86 points. distance Set a new record closing price on Monday. But the S&P500 lost only 0.20%, falling to 4,246.59 points, also falling from a record high. Dow Jones lost 0.27% and ended the day at 34.299.33 points.

Macro data went first. Media attention focused on the unexpectedly deep drop in retail sales, which in May was 1.3% lower than in April. Economists had expected a decline of 0.8% from the previous month. But the massive upward revision of April results (correction from 0.0% m/m to +0.9% m/m) made up for the failure to meet market consensus.

The more it is The face value of US retail sales in May was 28.1% higher than it was a year ago, still exceeds the pre-pandemic trend. So the data was still very strong and at best indicated a shift in some spending to the services sector, which wasn’t fully open in many states until spring. In the previous months, people deprived of access to many services spent more money on material goods, which led to a boom in the industrial sector.

The latter, on the other hand, was a bit disappointing. US industrial production rose 0.8% month over month in May. This should be more than expected at 0.6%, but here the April result is revised lower: from +0.7% to 0.1% m/m. However, in my opinion, the most important was the report on accelerating product inflation.
May PPI rose 6.6% year on year, beating market expectations of 6.3%.

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And it wasn’t just more expensive fuels that had an impact, with the core PPI (ie, the net index of fuel, food and energy prices) up 5.3% year over year. This is an indication of how strong and widespread inflationary pressure is in the manufacturing sector. Moreover, producer prices are rising at a faster pace than consumer prices, which puts negative pressure on the performance of companies.

However, the market reaction was somewhat muted. There was almost no significant movement in US Treasuries prices. The market still appears to be “buying” the Fed’s narrative of the unusual “transitional” nature of the current wave of inflation. At least that’s what the latest Bank of America survey shows – 72% of its institutional clients (ie mutual funds) consider the current inflation a temporary phenomenon.

Already on Wednesday, the markets will receive an official statement from the Federal Open Market Committee (FOMC), as there may be some signs of a change in the very loose monetary policy. After all, the economy is in full swing (with GDP growth of 5-6%), there are as many job offers as the number of unemployed people, and official inflation measures show results in the 5-7% range. Maybe that’s “a little” too much for the zero interest policy and the $120 billion per month pumping into quantitative easing.

Krzysztof Colani

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