Wall Street did not move in anticipation of the announcements that will arrive later, around 20 Italian time, from the FOMC, the monetary policy arm of the Fed. The Dow Jones falls by 0.06% to 34.277 points; the S&P 500 hits a new record, with a minimum change of + 0.01%, while the Nasdaq shows more panache, advancing 0.24% to 14,104 points. US 10-year Treasury rates are under control, falling back below the 1.5% threshold to 1.487%. Euro-Dollar down 0.09% to $ 1.2113. The dollar rose 0.21% against the pound to $ 1.4108 while the yen fell 0.17% to JPY 109.88.
Market trepidation for the Fed is high when you consider the latest US inflation numbers. Just today the US import price index was released, which rose by 1.1%, over the + 0.8% expected by analysts.
The April figure was revised upwards from + 0.7% initially disclosed to + 0.8%. Excluding oil import prices, the figure was up 0.9%, more than the + 0.5% expected and after + 0.7% the previous month.
On an annual basis, import prices jumped 11.3%, over the estimated + 10.9%. The April figure was revised upwards from + 10.6% initially disclosed to + 10.8%. Focus on import prices of non-energy goods, which jumped 6% on an annual basis, to a record from + 6.1% in 2008.
US export prices also increased, up by 2.2% on a monthly basis, well above the estimated + 0.8% and + 1.1% in April (revised upwards from +0.8 % previously disclosed). On an annual basis, the trend was a jump of 17.4%, compared to the + 15.2% expected, following the + 14.9% in April.
Another alert on US inflation came yesterday with the publication of the producer price index, an important thermometer of the inflation trend which, in May, marked the strongest growth of all time.
The figure followed the communication, days ago, of the other price thermometer: the consumer price index, also in May, which flew to a record since 2008 for the second consecutive month, showing core inflation at a record high in almost 30 years.
So far the Fed has reassured the markets, saying that the jump in inflation is only temporary, and that talking about tapering is premature.
The forecasts on what Powell will say and do today remain reassuring: a CNBC survey dedicated to the Fed’s moves revealed that analysts believe that the Federal Reserve’s monetary policy will remain ultra-accommodative at least until the end of 2021.
Most analysts surveyed said they believe tapering will be announced this year, but true tapering won’t start until January 2022.
To be precise, according to the interviewees, Jerome Powell’s Fed will announce tapering, therefore the reduction in asset purchases that are currently taking place for a value of $ 120 billion per month, as part of the QE plan, at the FOMC meeting next year. October. The real reduction in monthly purchases will then begin in January 2022, the same month indicated by the consensus in the previous April survey.
At the same time, however, respondents said they expected the first rate hike in November 2022, a month earlier than predicted in the previous poll. 89% of the 35 economists surveyed reported that, in their view, asset purchases that are made under the QE plan are no longer necessary to support the US economy: the percentage is up sharply from 65% who had responded the same way in April.
For their part, the analysts of ING wrote in the report dedicated to the Fed that “they still believe that the first rate hike will be at the beginning of 2023, with the risk that action will be taken even earlier, given that the scars related to the pandemic are still present. in the supply chain they mean that the supply itself will struggle to keep pace with the strength of demand ”.
That said, there is someone who shares Jerome Powell’s Fed position. “I still believe equities will rise,” said Rick Rieder, head of the global bond division of asset management giant BlackRock. Speaking on the CNBC broadcast ‘Squawk Box’ Rieder said: “If we hear nothing different, then I will worry a little about the risk that the system creates. Asset bubbles can be created, leverage can be created ”. For his part, Brad McMillan, CIO at Commonwealth Financial Network, commented that “this week the drama will be unleashed depending on whether the Fed keeps the point or admits that inflation is rising and that the Fed needs to intervene. Since the Fed has a dual mandate (on unemployment and inflation) then the central bank will keep its focus on unemployment rather than inflation ”.
Returning to the markets, the economists interviewed by the CNBC believe on average that the S&P 500 will end in 2021 at 4,285 points, and then rise to 4,468 points by the end of 2022.
The US equity benchmark index is currently at 4,246 points.
Economists themselves predict that 10-year Treasury rates, currently at 1.5%, will rise to 1.85% by the end of this year, to exceed 2.3% next year.
From the US macroeconomic front, the figure that measures the start-up of new construction sites was also announced today, which rose by 3.6% in May to an annualized rate of 1,572,000 units, worse than the 1,630,000 units expected, but up from 1,517,000 units in April (revised up from the previously reported 1,569,000 units).
Building permits fell by 3%, to 1,681,000 units, worse than the 1,730,000 units expected and compared to the 1,733,000 units in April (revised down from the previous 1,760,000 initially disclosed.
Among the stocks, Big Techs such as Tesla and Nvidia are slightly down, while the stocks of the companies that benefit most from the reopening of the post-Covid-19 economies are gaining. The stocks of the giants that manage cruise travel Royal Caribbean and Carnival are growing.