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Top 5 Things to Watch in Markets in the Week Ahead

EconomyMay 09, 2021 06:48AM ET
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© Reuters

By Noreen Burke

Investing.com -- Investors will turn their attention to U.S. inflation figures in the coming week after Friday’s surprisingly disappointing April jobs report. Signs of rising inflation pressures could reignite the debate over how soon the Federal Reserve may begin to tighten monetary policy. Multiple Fed speakers are to make appearances in the coming days and their comments will be closely watched. Energy traders will be monitoring the shutdown of the largest U.S. gasoline pipeline after a ransomware attack. The tug of war between value and growth will likely continue in the equities market as earnings season winds down. And across the pond, the UK is to release data on first quarter GDP. Here is what you need to know to start your week.

  1. Inflation fears

Wednesday’s consumer price index figures for April get top billing on the U.S. economic calendar this week amid concerns among investors that rising price pressures could prompt the Fed to start scaling back monetary support measures sooner.

While inflation is on the rise, Fed policymakers have repeatedly said the increase is due to temporary factors.

The inflation numbers are coming in the wake of data on Friday showing U.S. job growth slowed sharply last month, with the economy adding just 266,000 jobs, far short of forecasts for 978,000. The unexpectedly weak data raised doubts over the expectations of some investors that the Fed could start tapering stimulus measures later this year.

PPI figures are due out on Thursday, followed by retail sales data on Friday. Retail sales jumped in March boosted by stimulus checks and this effect is expected to carry over into April.

  1. Pipeline shutdown

Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network, without saying when it would reopen, after a cyber-attack involving ransomware on Friday.

Colonial is the main source of gasoline for the East Coast and also serves some of the largest U.S. airports. The incident has highlighted how vulnerable U.S. energy infrastructure is to hackers.

A prolonged outage of the network could trigger price increases at gasoline pumps ahead of peak summer driving season, a potential blow to U.S. consumers and the economy as pandemic restrictions are eased.

The outage could also potentially affect oil refineries on the Gulf Coast if refiners are forced to reduce crude processing because part of the distribution system is offline.

  1. Fed speakers

Some investors have become skeptical of the Fed’s assurances that any inflation resulting from the government’s massive economic stimulus programs will be transitory, with prices for everything from raw materials to real estate already showing big gains.

Several Fed speakers are on the calendar in the coming days, including Vice Chairman Richard Clarida, who is due to speak shortly after Wednesday’s inflation figures are released.

Other policymakers due to speak during the week include Fed Governor Lael Brainard, Chicago Fed President Charles Evans, San Francisco Fed President Mary Daly, New York Fed President John Williams and Dallas Fed President Rob Kaplan.

  1. Stocks tug of war

While some tech stocks got a boost Friday in the wake of the disappointing jobs report, some portfolio managers say that blow-out earnings from several large tech companies over the last few weeks are not enough to keep making outsized bets on the sector.

Instead, those fund managers say that they are continuing to rotate into value and cyclical stocks - whose fortunes are closely tied to economic conditions - in anticipation that the economic recovery will be longer and more gradual than originally anticipated.

That trend looks set to continue and investors will also be looking at quarterly results from companies such as Disney (NYSE:DIS), Marriott (NASDAQ:MAR), Airbnb (NASDAQ:ABNB) and Tyson Foods (NYSE:TSN), as a first-quarter earnings season which has been notable for far higher-than-expected profits winds down.

  1. UK GDP

The UK is to release data on first quarter GDP on Wednesday which is expected to confirm that the recovery from the pandemic is already underway.

While growth over the whole period is expected to have contracted the monthly figures for March may show a sharp increase as the vaccination rollout allowed pandemic restrictions to be eased.

Last week the Bank of England said the economy was set to return to its pre-pandemic size in the last quarter of 2021, three months earlier than previously thought and raised its forecast for growth in 2021 to 7.25% from February's estimate of 5.0%.

That would be the fastest annual growth since 1941, but it comes after output plunged by 9.8% in 2020, the biggest drop in more than 300 years.

--Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (10)
DAS Ibnu Safian
DAS Ibnu Safian May 09, 2021 11:54PM ET
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Oil up. Means good chance for Tesla to rise up
Leon Kelly
Leon Kelly May 09, 2021 2:40PM ET
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Small cap will steal the show this week. Dow will take a breath
ga bray
ga bray May 09, 2021 11:20AM ET
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think I'd rather had a uv bulb up my bum, disinfectant in my veins, dodging explosive trees and hiding from nuclear fallout from dropping nukes in hurricanes, and pay no attention to all the dead bodies that would have literally paving the streets, intelligence is way over rated,
Bret Lafrance
Bret Lafrance May 09, 2021 11:20AM ET
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Ok! i’ll take that bet, just start with the UV bulb and disinfectant and we can figure out how to simulate the rest if you still feel the same way. ;)
Zachary Will
Zachary Will May 09, 2021 11:10AM ET
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Everyone's worried about inflation, but aren't considering the possibility of something arguably worse, deflation. I'm scared we're walking ourselves right into a liquidity trap. following the same fiscal and monetary playbook as Japan. gov buying bonds and spending like crazy, fed's QE and low interest rates. meanwhile, wages are up, prices are up, production and demand are increasing. there's going to be a sudden slow down and wam, liquidity trap. our wages fall back down along with the prices, production, and demand. we're like Japan, who's economy and stock market still hasn't reached it's 1980's pre-crash levels.
Steve Peters
Steve Peters May 09, 2021 10:50AM ET
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Welcome to Liberal Socialist Communist Democrats push for Socialism in the U.S. These nuts bribe people to stop working with handouts. Wait until the money runs out. The jobs report was trash, because Liberal Socialist Communist Democrats want people to stop working. Lunatics! God help us. Quid Pro Quo Joe Biden is a FRAUD.
Mark Stallone
Mark Stallone May 09, 2021 10:50AM ET
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we'll said.
Zezu Zaza
zezuzaza May 09, 2021 10:43AM ET
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We follow the market but not market follow us
Rasheed Yusuf
Rasheed Yusuf May 09, 2021 10:07AM ET
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All i want is a bull ride this week
Œvèr TÊæm
Œvèr TÊæm May 09, 2021 10:03AM ET
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wow
New Jazenevd
New Jazenevd May 09, 2021 9:05AM ET
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Present “stimulus” payments stimulate some folks to stay at home, without serious attempts to find a job. Obviously, dem party will continue this vote buying program, while imitating recovery by increasing money printing.
Show previous replies (5)
Bret Lafrance
Bret Lafrance May 09, 2021 9:05AM ET
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you want consumers to continue consuming, and suppliers to stop hoarding and start producing and hiring tk meet the demand.
Doug Ash
Doug Ash May 09, 2021 9:05AM ET
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Why the attack? his comment is clearly true and any changes in the fed min wage will take months to get thru congress so im not sure your point makes any since in the short run. Futhermore, 29 states already have a higher min wage than the fed min wage and thise states cant get people back to work either bc of the generosity of the fed govt.
Bret Lafrance
Bret Lafrance May 09, 2021 9:05AM ET
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Goods and materials are being imported into the US at a record pace, however, the entities importing them are not distributing them or hiring people to turn them into product quickly enough to keep up with end consumer demand, which is also being artificially created by the same policies. Why, what are ALL of the economic policies that make this scenario possible and how do we adjust them so that the demand continues to grow, and capacity to meet that demand also grows at a healthy pace to generate good paying jobs, grester revenue and healthy profits?
Dan Leon
Dan Leon May 09, 2021 9:05AM ET
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exactly, doesn't it remind you of a socialist system country? hmmmmm
Bret Lafrance
Bret Lafrance May 09, 2021 9:05AM ET
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Exactly, so in order to ween our economy off of the federal teat and get back to a free market society we need to use this time of free money to A) sustain the demand because that is hard to restart once it stops B) invest in infrastructure to support increasing supply C) make it easy for people to do the work to increase supply and satisfy demand.
Ronald Warren
Ronald Warren May 09, 2021 7:40AM ET
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It's too late. Powell will not be able to put the genie back in the bottle. Inflation is all around us! Across the board my guess is that it should come in at 20 to 30% this year. A building I remodel in here on the gulf coast has 3 bed 3 bath units that were selling in the high fives had a reset last month and are going for $799,900 now. Everything I purchase at the lumberyard has increased. Last week, sheets of HardiBacker jumped from 13.97 to 22.98. We all know that lumber is still up 300%. Copper has doubled. That's just the tip of the iceberg. Low interest and excess cash production have taken over and there will be no stopping it. We still have a ways to go, but you can mark my words," By this time next year. there will be nothing left of our economy. " For now, investors and traders are wise to remain bullish. I need that genie to let me know when the financial collapse is coming.
Aneudy Henríquez
Aneudy Henríquez May 09, 2021 7:40AM ET
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You couldn't say it better! Be ready guys! It will come for sure!
Bret Lafrance
Bret Lafrance May 09, 2021 7:40AM ET
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Why have housing, and lumber and oil and steel prices all jumped up? What is the common factor? Why are shipping and imports at their highest level of all times and yet goods are sitting on the docks, undistributed, the value of them going up for someone who holds onto them as demand increases and is not being met? Why can those who own them afford to hold onto them versus getting them to market?
Bret Lafrance
Bret Lafrance May 09, 2021 7:40AM ET
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The answer is simple, through unlimited near zero interest rates and forgivable PPP loans, businesses are creating more value out of holding onto their raw materials and doing nothing, not hiring, not running mills, than they would if they processed or sold the resources that they control. Taperring of bond buying and cutting back of PPP, with an extension of unemployment benefits will free up resources. We will see some weak businesses close but others will be hiring. Keep the unemployment going while you do the others to keep demand going and taper that in concert with small increases to interest rates. Complete opposite of what republicans are saying to do, im not a democrat but it certainly does seem that the republican leadership have lost the plot with their colonial era economic strategies. ;)
 
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