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“Youth is like having a big plate of candy.” – F. Scott Fitzgerald, This Side of Paradise

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

There’s a positive tone in futures this morning which is helping to reverse Monday’s decline. With earnings season not kicking off for a couple of weeks, investors are left to grapple with whether the results from Q1 will be enough to justify the rally since late October. The only significant earnings report this morning (and this week for that matter) was from spice maker and seasoning behemoth McCormick (MKC) which reported better-than-expected EPS and sales and is trading up about 6% in the pre-market. That better-than-expected result was telegraphed last week when General Mills (GIS) reported better-than-expected EPS and sales and noted in its conference call that it was seeing a pickup in the percentage of Americans choosing to eat at home. Outside of MKC, though, we’re in a bit of a vacuum for earnings results, and that will leave investors forced to focus almost exclusively on economic data and attempt to extrapolate that into company results.

Outside of the equity market, treasury yields have seen a modest downside bias along with the dollar, and Bitcoin is little changed after surging back above $70,000 yesterday. While not necessarily a financial story, the collapse of the Francis Scott Key Bridge in Baltimore after a container ship crashed into it overnight will pose problems for ship traffic in the Port of Baltimore and a traffic nightmare for cars not to mention the tragic loss of life. As fans of The Wire will remember, the port is one of the largest in the nation. Bloomberg also reported that no other port in the United States handles more imports of autos and light trucks.

It’s a holiday-shortened week for the stock market but not for the economic calendar, and the most important report of the week could be Friday’s release of Personal Consumption Expenditures (PCE) for February when the equity market will be closed in observance of Good Friday.  Already released inflation data for February suggested that the January increase may have been more than an aberration. Therefore, traders will pay close attention as PCE is typically considered the Fed’s preferred inflation measure.

While the release of PCE only covers February, already released regional Fed manufacturing reports for March showed some encouraging signs. We’ll start with the bad news first. In the Dallas Fed Manufacturing report, released on Friday, the Prices Paid component ticked up from 15.4 to 21.1 – the highest level since September. While the Dallas Fed report showed a pickup in prices, the Empire and Philly Fed reports showed a deceleration. In the Empire report, March’s reading of 28.7 partially reversed some of the February surge, but outside of February’s reading, it would have been the highest level since last May. Saving the best news for last, the Prices Paid component of the Philly Fed report plunged from 16.6 down to 3.7. Not only is that barely in positive territory, but it’s also the lowest monthly reading since May 2020.

To round out the five regional Fed reports, the Richmond Fed report will be released at 10 AM today and the KC Manufacturing report comes out on Thursday. Overall, the first three of the regional Fed reports show a mixed picture in terms of inflation, but there were some welcome trends.

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