Fed dovishness emerges ahead of pivotal CPI report

US stocks are mixed heading into a pivotal inflation report that should support one more rate hike by the Fed.  Today’s headlines didn’t tell Wall Street anything it didn’t already know: IMF trimmed their growth outlook, Fed’s Williams supported one more hike, and CarMax earnings showed consumers are leaning towards older vehicles.

CarMax is rallying on its earnings and that is giving Autonation a boost.  Boeing’s news that jet deliveries surged, making its 2nd-best month in four years helped send several airliners higher.  Tech is lagging today as yields are creeping higher ahead of tomorrow’s inflation data. 

Fed

Fed’ Williams signaled that the Fed’s median forecast of a 25-basis point rate rise is a reasonable starting place.  If inflation comes down, the Fed will need to lower rates.  He also noted that it is too soon to see changes in credit conditions and availability. 

Fed’s Goolsbee noted that prudence and patience is needed to assess bank stress. Adding that financial stress could have the impact of between 25-75 bps in tightening. 

Pricing of swaps linked to scheduled Federal Reserve meetings now suggest a 75.8% chance of a quarter-point rate hike at the May 3rd policy meeting. 

Oil

Crude prices held onto earlier gains after the EIA short-term energy outlook didn’t contain any massive production shocks and steady demand improvements over the next couple of years. The oil market is going to remain tight and while China’s reopening has underwhelmed, they will do a lot better going forward and that should keep prices supported. 

WTI crude is starting to make a move higher and if after tomorrow’s inflation report prices continue to rise, the $85 level might not provide much resistance. 

Gold

Gold is starting to see some flows now that Europe is back from holiday.  Gold demand should remain healthy as a plethora of risks remain on the table this week. This is the week Wall Street starts to focus more on Main Street and that should keep safe haven flows coming gold's way.  Gold’s path to record territory could become very clear post inflation report and if more signs of banking stress emerge.    

Crypto

The Ethereum community is excited that the Shanghai upgrade is finally here.  This massive network upgrade will take place on April 12th at 6:27pm est.  This means that 18 million tokens are freed from the Ethereum Beacon chain, so they can sell it, hold it, or stake it for longer.   

A lot didn’t think it would happen as it didn’t seem like it would be possible to withdraw staked ETH?

The complete name for the upgrade is the Shapella upgrade as it includes the Ethereum Shanghai upgrade and Ethereum Capella upgrade.  If people were eager to sell they could have sold their staked ETH, so it might not necessarily trigger a ‘sell the news event’ reaction.