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US equities finished mixed Friday to close out a negative week as market participants continue to digest the Federal Reserve’s latest meeting minutes and look forward to the March consumer price index (CPI), which will provide further insight into the pace of inflation. 

As a reminder, the previous consumer price index (CPI), which showed prices rose an average of 7.9% year-over-year, did not account for the spike in oil and other commodities following Russia’s invasion of Ukraine. As a result, expect CPI to come in even higher next week. 

Markets Today

  • S&P 500 (SPY): -0.26%
  • Nasdaq (QQQ): -1.41%
  • Dow Jones (DIA): +0.41%
  • Russell 2000 (IWM): -0.74%
  • Volatility Index (VIX): -0.32%
  • Shopify (SHOP): -6.43%
  • AMC Entertainment (AMC): +18.20%
  • JP Morgan (JPM): +1.83%
  • Gold Miner ETF (GDX): +2.56%
  • NVIDIA (NVDA): +4.74%
  • Twitter (TWTR): -3.73%
  • Atlassian (TEAM): -7.17%
  • EPAM Systems (EPAM): 10.13%

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With the fastest pace of inflation in forty years, commentary from Federal Reserve officials remains in focus. St. Louis Fed President James Bullard said he wants the Fed to get to between 3% and 3.25% on the funds rate in the second half of this year, implying more aggressive, front-loaded interest rate hikes in the near-term. Bullard was the only dissenter in the Fed’s March meeting, calling for a larger 50 basis point interest rate hike versus the 25 basis point hike that ultimately occurred.

While Bullard has consistently been the most hawkish member of the Fed, there are signs other officials are also warming up to the idea of a 0.50 basis point hike in the next meeting. 

Fed Governor Lael Brainard said that the Federal Open Market Committee (FOMC) was “prepared to take stronger action,” should inflation readings remain elevated and warrant such moves. And in the Fed’s meeting minutes released Wednesday afternoon, the central bank revealed that “many participants … would have preferred a 50 basis point increase” in rates, and also suggested the Fed was gearing up to soon announce the start of its balance-sheet runoff process.

However, other members of the Fed continue to offer a more dovish approach to raising rates. Atlanta Fed President Raphael Bostic said it would be “appropriate” to move the benchmark interest rate “closer to a neutral position,” suggesting a somewhat less hasty series of interest rate hikes. Meanwhile, Chicago Fed President Charles Evans suggested the Fed would be able to “get to neutral, look around, and find that we’re not necessarily that far from where we need to go.”

Kevin Nicholson, chief investment officer of global fixed income in Riverfront Investment Group, said “The market actually had to digest a lot of information — a lot of hawkish information from the Fed over the last couple of days. We had been in a sell-off mode. And I think [Thursday] we finally got a chance to take a breather and realize that the equity markets especially have some actual positive things that are going on. We also think that you have support with a strong labor market. “The economy is in great shape from that perspective.”

Next week, earnings season kicks off, with JP Morgan and other big banks presenting their Q1 2022 earning reports. This will help elucidate how the economy has performed during a very tough quarter. 

Highlights

  • Tesla (TSLA), Block (SQ), and blockchain company Blockstream are reportedly working together on a plan to mine bitcoin in Texas with solar power, according to CNBC on Friday.
  •  United Airlines confirmed on Friday it has delayed the return of some grounded Boeing 777 planes with Pratt & Whitney 4000 engines until at least May 12 after an incident that saw debris fall over Denver shortly after takeoff. 
  • Ever since Barclays Plc halted sales and issuance of a popular stock-volatility product last month, it’s traded at a large premium to its underlying assets due to the sudden lack of supply.
  • Taiwan’s exports rose for a 21st straight month in March to a new record in line with forecasts, boosted by continued strong tech demand, though the government warned of continued supply chain uncertainty and the effect of the war in Ukraine.
  • Ford Motors (F) said it will pay a second-quarter dividend of 10 cents per share on outstanding shares of the company’s common and Class B stock.
  • Microsoft (MSFT) said on Thursday it had disrupted hacking attempts by Russian military spies aimed at breaking into Ukrainian, European Union, and American targets.
  • Yesterday, Tesla (TSLA) held an event to mark the opening of its $1.1 billion factory in Texas to produce more cars. 
  • The Biden administration said senior officials held a meeting Wednesday with major automotive leaders including Tesla Chief Executive Elon Musk and General Motors Chief Executive Mary Barra to discuss electric vehicles and charging.
  • Applications for unemployment insurance fell sharply in the latest weekly data to the lowest level since 1968 and represented a third consecutive week that new claims were below 200,000, with new layoffs and firings staying low compared to pre-pandemic averages.

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