Markets wobble as attention is on the next inflation reports

Dow retreated 131, decliners modestly ahead of advancers & NAZ rose 81 to another record.  The MLP index was steady in the 274s & the REIT index hardly budged in the 366s.  Junk bond funds inched higher & Treasuries had limited selling which raised yields (more below).  Oil gained 1+ to the 79s ( more below) & gold went up 20 to 2355.

Dow Jones Industrials 

The Federal Reserve should wait for significant progress on inflation before cutting interest rates, Minneapolis Federal Reserve Pres Neel Kashkari said.  Asked what conditions were needed for the Fed to cut rates once or twice this year, Kashkari said: “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”  He said the central bank could potentially even hike rates if inflation fails to come down further.  “I don’t think we should rule anything out at this point,” Kashkari added.  He does not have a vote this year on the rate-setting Federal Open Market Committee, though he does get to have input during policy discussions.  He will vote next in 2026.  US inflation rose by a slightly less-than-expected 0.3% in Apr, providing some relief for policymakers.  Still, it remained up 3.4% on the year.  Kashkari said he was confident the Fed would ultimately reach its 2% inflation target, but added: “I’m not seeing the need to hurry and do rate cuts. I think we should take our time and get it right.”  He said the central bank may consider raising its target rate in the future but that it was not appropriate to “move the goal posts” at this stage.  Kashkari added  earlier this month that the Fed may need to hold interest rates steady for “an extended period” — possibly all year — in order to reach its target.

Fed’s Kashkari wants ‘many more months’ of positive inflation data before a rate cut

The 10-year Treasury yield edged higher to start the shortened trading week, as investors await fresh data releases on inflation.  The 10-year Treasury yield rose more than 1 basis point to 4.491%, while the 2-year Treasury yield shed 2 basis points to 4.933%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors are hungry for more data on the economic & inflationary picture after the minutes from the Federal Reserve's latest meeting, released last week, showed uncertainty among policymakers about when to ease policy.  On Fri, they'll parse the Apr personal income & expenditures report, which includes a measurement of price movements across a range of consumer expenses.  Also on Tues, Conference Board data showed consumer confidence unexpectedly increased.  However, expectations for inflation also climbed.

10-year Treasury yield inches higher to start shortened trading week

US crude oil gained more than 1% after booking a loss last week as the market focuses on an upcoming key OPEC+ meeting.  OPEC+ will hold a virtual meeting on Sun to review its production policy.  Several OPEC+ members are voluntarily holding 2.2M barrels per day off the market to support prices.  Deutsche Bank analyst Michael Hsueh said OPEC+ countries are unlikely to raise production given that the current price of Brent is closer to $80 per barrel than $90 per barrel.  Tamas Varga, analyst with oil broker PVM, said he expects “no changes in production will be forthcoming” because the meeting is virtual.  Deutsche Bank has maintained its current Brent forecast of $83 per barrel for the 2nd qtr & $88 in the 2nd ½ of the year, assuming OPEC+ will maintain its production policy on Sun.  But pressure will grow on the group after the Jun meeting to raise output, which could push Brent prices below $80 a barrel.  Saudi Arabia understands that maintaining a target price for oil significantly above a breakeven price of $75 per barrel for the broad US oil sector is unsustainable in the long term.  And the stabilization of US production since Sep has given OPEC some room to maneuver.

U.S. crude oil gains more than 1% as market looks to OPEC+ meeting on production levels

The stock market remains mixed, although investors keep bidding tech stocks on NAZ higher as it it flirts with a record 17K.  Meanwhile interest rates persist at high levels which are a drag on the economy.