US Futures Rebound After April Inflation Report: Markets Turn

(Bloomberg) — U.S. futures rose and Treasury yields fell after a report showed that inflation moderated slightly in April while traders raised bets that the Federal Reserve will cut interest rates this year.

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Contracts for the S&P 500 and the Nasdaq rose to pre-market session highs after the report. Airbnb Inc fell 14% before the bell after the vacation home rental company provided a cautious forecast for revenue in the second quarter. Rivian Automotive Inc rose as the electric vehicle maker reported a smaller-than-expected loss and confirmed production plans.

US consumer prices rose 0.4% in April with the core CPI rising 4.9% yoy, just below expectations for a 5% rise. That’s still well above the 2% level the Fed is targeting as central bank officials try to reconcile the need to curb rampant inflation against a potential recession and banking sector jitters.

Policy-sensitive 2-year Treasury yields fell 8 basis points to 3.94%, while the 10-year rate was 3.45%. The dollar strength index slid. The swaps indicate that traders have started pricing in roughly 75 basis points of interest rate cuts this year.

Investors remain on alert for the risks from confrontation in US debt talks, with some of the more experienced traders on Wall Street warning of “unimaginable” long-term damage from a default.

President Joe Biden and Republicans in Congress have made little tangible progress toward avoiding a default in the United States for the first time ever. They pledged further negotiations on spending, which would open the door to a possible deal. Biden and House Speaker Kevin McCarthy plan to hold another meeting on Friday.

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The cost of insuring America’s debt against default now exceeds that of some emerging markets and even junk-rated countries. Growing investor concern about the possibility of default has made Treasury insurance more expensive than those of Greece, Mexico and Brazil, among others, which have defaulted several times and have credit ratings much lower than the United States.

In commodities, oil snapped a three-day rally, lower as traders digested a mixed supply report from an industry group.

Main events this week:

  • China PPI, CPI, Thursday

  • Bank of England interest rate decision, industrial production, gross domestic product, Thursday

  • US Producer Price Index, Initial Jobless Claims, Thursday

  • The Group of Seven finance ministers and central bank governors meet in Japan, Thursday

  • Consumer confidence in the American University of Michigan, Friday

  • Federal Reserve Governor Philip Jefferson and St. Louis Federal Reserve Chairman James Bullard participate in a panel discussion on monetary policy at Stanford University, on Friday.

Some of the major movements in the markets:

Stores

  • S&P 500 futures were up 0.7% as of 8:46 a.m. New York time.

  • Nasdaq 100 futures rose 0.8%.

  • Futures on the Dow Jones Industrial Average rose 0.4%.

  • The Stoxx Europe 600 hasn’t changed a bit

  • The MSCI World Index was little changed

currencies

  • The Bloomberg Spot Dollar Index fell 0.3%.

  • The euro rose 0.3 percent to $1.0990

  • The British pound rose 0.3 percent to $1.2662

  • The Japanese yen rose 0.5% to 134.60 per dollar

Digital currencies

  • Bitcoin rose 1.6% to $28,094.57

  • Ether rose 1.6% to $1,879.45

bonds

  • The yield on the 10-year Treasury fell six basis points to 3.45%.

  • Germany’s 10-year yield fell six basis points to 2.29%.

  • The UK 10-year yield fell three basis points to 3.82%.

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goods

  • West Texas Intermediate crude fell 0.2% to $73.55 a barrel

  • Gold futures rose 0.4 percent to $2,051.50 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Eva Salai.

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