Monday's Market Minute: Dollar And Inflation Take Center Stage

Last week, we saw indices bid with the U.S. Dollar and rates here in the U.S. on the rise as optimism tied to vaccine news and better-than-expected economic data trends continued. We saw yields spike, the curve steepen, the U.S. Dollar back above 91.50 and above the 200-day moving average against the yen. With all this happening, the S&P500, the Nasdaq-100, and the Russell 2000 posted new all-time highs. This week, earnings remain a major focal point, with tech names like Twitter Inc TWTR and Cisco Systems, Inc. CSCO reporting. Keep an eye on Under Armour Inc UAA, Coca-Cola Consolidated Inc COKE, General Motors Company GM, and PepsiCo, Inc. PEP all reporting this week as well – don’t forget about Uber Technologies Inc UBER and LYFT Inc LYFT. But I think after three weeks of central bank activity one thing is clear; in addition to earnings, we need to be keeping an eye on two things: jobs and inflation.

Last week it was all about the jobs data, which was somewhat disappointing. Non-farm payrolls increased by only 49K and private payrolls were up a dismal 6K. The unemployment rates fell to 6.3%, but so did participation. We saw wages inch up by 0.2% M/M. This week it’s all about inflation. Wednesday we’ll get the CPI (Consumer Price Index) monthly and year-over-year data. This week’s CPI Data, if higher than expected, could add to the move up in financial markets, could accelerate the yield curve steepening, and my guess is the Dollar would strengthen as well. Last week I wrote about how the better-than-expected data here in the U.S. seems to be supporting the Dollar. The real question is, at what point does that become a headwind for U.S. indices? Also this week, keep an eye in energies: WTI crude and the Brent have been bid as well even with a strong Dollar. Inventories will be closely watched after another draw last week, and don’t forget about the EIA short-term energy report; many expect them to provide a bullish scenario with the recent vaccine news. So as always, we have a lot to keep an eye on but rates, the Dollar and inflation will take center stage.

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