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And a slew of fresh model signals
Equity futures are essentially unchanged as we get ready for the trading day ahead. Unlike the last few trading days that were rather quiet, we are back to business today with a slate of events, some of which could reshape Fed rate cut timing expectations.
NFIB’s Small Business Optimism Index rose by 1.2 points in April to 89.7, marking the first increase of this year but the 28th consecutive month below the 50-year average of 98. Twenty-two percent of owners reported that inflation was their single most important problem in their business, down three points from March but still the number one problem for small business owners. The report also found that 56% of owners reported hiring or trying to hire in April, and of those hiring or trying to hire, 91% of owners reported few or no qualified applicants for the positions they were trying to fill.
At 8:30 AM ET, the April Producer Price Index (PPI) report will be released and the market is expecting to see headline PPI tick higher to 2.2% YoY from 2.1% in March. Core PPI, however, is forecasted to match March’s 2.4% increase on that basis. Following the surge found in prices paid data in April PMI reports, we would not be surprised if the April PPI data came in ahead of market expectations. If that occurs, it would not only be another data point questioning the market’s expectation for a September rate cut, but we are likely to see some re-jiggering of expectations for tomorrow’s April CPI report. We would suggest readers watch the yield on 10-year Treasuries, gold prices, the dollar, and equity futures to gauge the market’s reaction to this report.
Soon after the April PPI report is published, Federal Reserve Governor Lisa Cook will be speaking at a Federal Reserve Bank of New York event. No doubt, investors will be interested in her remarks following recent consumer inflation expectation data and this morning’s April PPI report. However, the market is likely to take its cues from Fed Chair Jay Powell when he participates in a Foreign Bankers Association event at 10 AM ET.
This afternoon brings Google’s (GOOGL) IO event, its developer conference. The running joke is the event should be renamed “Google AI” because Gemini is likely to be center stage, but AI is likely to be a factor in many if not all of the company’s presentations. We also expect to see the latest developments for Android as well as Wear OS, Android TV, and Android Auto.
In terms of quarterly earnings this morning, we will be picking over comments from Home Depot (HD) about new construction spending as well as consumer spending. What we’re looking to see is whether Home Depot’s spring selling season is expected to reflect the more selective consumer spending described by restaurants and other consumer-facing companies. When Jack in the Box (JACK) reports, the focus will be on that as well as what impact it expects from the recent minimum wage boost to $25 per hour for California fast food workers. About 43% of Jack’s US locations are in California.
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