Yellen Gaffe, ADP and ISM, Dogecoin Mania, Oil Near $70 - What's Moving Markets

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By Geoffrey Smith

Investing.com – Janet Yellen’s comments on interest rates make an interesting backdrop for ADP’s monthly survey on private-sector hiring and the ISM’s non-manufacturing survey. The auto sector dominates the earnings calendar, with GM and BorgWarner (NYSE:BWA) due to report and Jeep owner Stellantis’ quarterly figures already out. Oil tests $70 after another sharp drop in U.S. inventories, and the Dogecoin mania/Ponzi scheme intensifies ahead of Elon Musk’s appearance on SNL. Here’s what you need to know in financial markets on Wednesday, May 5^th.

1. ADP, ISM non-manufacturing due as Yellen comments shed new light on policy outlook

ADP will publish its estimate of private-sector hiring in the month through mid-April at 8:15 AM ET (1215 GMT), and is expected to corroborate evidence of a continued and strong recovery in the labor market. Analysts expect 800,000 new private-sector jobs to have been created as the hospitality and other service sectors took advantage of their expanded freedom to operate.

The ISM’s non-manufacturing survey for April will also be published at 9:45 AM ET, where again the focus will be on the employment subindex, given the Federal Reserve’s focus on the job market as it steers monetary policy through the latter stages of the pandemic.

On Tuesday, Treasury Secretary (and former Fed Chair) Janet Yellen had triggered upheaval in equity markets by saying that interest rates “may have to rise” to stop the economy overheating. Her subsequent efforts to walk back the comments didn’t change the realization that such steps are already on the radar for policymakers.

2. Dogecoin mania reaches new highs

Dogecoin surged another 38% to a new record high of over 66 cents as the frenzy for cryptocurrency intensified ahead of an eagerly-anticipated appearance by crypto enthusiast Elon Musk as guest host of Saturday Night Live.

Crypto blogs are touting the possibility that Musk, whose public backing for Dogecoin triggered the spike in its price this year, will use the podium to pump it once again.

Dogecoin’s market capitalization has now risen to $85 billion after rising 118% in the last seven days. The asset, which started out as a joke and has no obvious economic or social utility, is now the fourth biggest cryptocurrency by market value.

3. Stocks set to rebound after Yellen-induced dip; GM, PayPal earnings due

U.S. stocks are expected to open higher later, as the market recovers its nerve after a sharp sell-off in response to Yellen’s comments on Tuesday. Tech stocks, which fell most sharply on Tuesday due to their interest-rate sensitivity, were posting the highest gains in premarket trading.

By 5:45 AM ET, Nasdaq 100 futures were up 0.6%, while Dow Jones futures were up a more modest 85 points, or 0.3%, and S&P 500 futures were up 0.4%.

Stocks likely to be in focus later include Lyft (NASDAQ:LYFT), which reported another strong month of passenger numbers after the bell on Tuesday and reiterated its goal of an adjusted EBITDA profit by the third quarter. Automakers will also be in focus, with General Motors (NYSE:GM) set to report early. Stellantis (NYSE:STLA), the owner of Jeep, rose 2.6% in Europe after reporting quarterly numbers ahead of expectations, despite problems with chip supplies

Component group BorgWarner also reports early, as do Exelon (NASDAQ:EXC) and Sempra Energy (NYSE:SRE), whose results will be marked by the winter storms across Texas and much of the rest of the south. Hilton Worldwide (NYSE:HLT), AmerisourceBergen (NYSE:ABC) and PayPal (NASDAQ:PYPL) are all due to report too.

4. India loosens monetary policy as Covid-19 runs amok

India’s central bank loosened monetary policy at the margins to help the country cope with a Covid-19 wave that is still essentially out of control.

The Reserve Bank of India announced a new term lending facility worth $7 billion to help healthcare entities’ access to credit as they scramble for basic supplies from PPE to oxygen. The benchmark Nifty 50 stock index rose 0.7% in response, while bank stocks more strongly.

The rupee, which had strengthened by nearly 2% in the last week, eased 0.3% against the dollar to 73.955.

The country reported a second straight drop in daily new cases to 382,000 on Tuesday, but most analysts say the number is likely under-reported. Officials deaths from Covid-19 hit a new daily high of 3,780.

5. Crude tests $70 after inventory drop; EIA eyed

Brent crude tested $70 a barrel for the first time in two months after the American Petroleum Institute reported the biggest weekly drop in U.S. crude stockpiles since November.

The API estimated inventories fell by 7.69 million barrels last week, after a 4.32 million barrel drop the previous week, giving fresh evidence of a surge in gasoline demand in particular. The government’s data are due at 10:30 AM ET, as usual.

By 5:45 AM ET, U.S. crude futures were off their overnight highs but still up 1.1% at $66.41 a barrel. Brent meanwhile was up 1.1% at $69.66, off an overnight high of $69.88.