- Equity markets closed lower on Monday after reaching new record highs again last week. There are no major headlines or drivers today, with markets continuing to digest last week's strong corporate earnings results along with a weak April employment report. International equities aren't experiencing any decisive moves either, as Asian markets were modestly higher while European equities were mixed. The energy, utility and financials sectors led today, while technology lagged. Action in the bond market is also subdued, with the 10-year benchmark remaining below 1.6%, following last week's pressure on yields amid the view that the disappointing jobs report will give the Fed cover to delay any tapering of bond purchases a while longer.
- A cyberattack on Colonial Pipeline over the weekend caused a shutdown of the country's largest pipeline network for transporting refined products. Oil and gasoline prices are higher, continuing their recent ascent. Commodity prices – including everything from lumber to agriculture products to metals – have risen sharply of late, with the overall commodity complex rising 12% over the past month. This has added to fears of rising inflation, which we expect to be the prominent instigator of market volatility as we advance this year.
- Earnings and monetary policy remain the primary undercurrents for the market. Stocks will continue to take their cues from the Fed, with rising inflation alongside a still-healing labor market forming a balance that will add uncertainties to the Fed's policy approach this year. Meanwhile, corporate earnings are a helpful tailwind, with earnings rising by nearly 50% for almost 90% of the S&P 500 that has reported first-quarter results so far.
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