U.S. equity markets finish mixed, with the Dow marginally lower and the tech-heavy Nasdaq higher.
With no major directional drivers, stocks are in a holding pattern ahead of Thursday’s inflation data. European stocks reached a new high as updated gross domestic product data showed that the first quarter contraction in the region was not as severe as initially thought.
Oil prices closed above $70 a barrel for the first time in more than two years, while 10-year government bond yields declined to 1.54 percent.
The price of crude oil was up $1.02 or 1.47 percent at $70.25 and the spot price of gold was down $3 or -0.16 percent to $1,895.70.
Economic data this morning included April job openings and the May small business optimism index, which combined paint the picture of a fast-improving economy that is running against labor supply constraints.
The small business optimism index eased slightly, with key labor-market components included in the index – hiring intentions and jobs-hard-to-fill – both rising to record highs.
Small businesses appear to face labor shortages as hiring picks up amidst a surge in demand. Generous unemployment benefits, health concerns and lack of child care are all reasons keeping people from re-entering the labor force, but these are likely to abate in the coming months.
Sentiment remains largely positive, but markets continue to grapple with the tug-of-war between economic optimism and inflation concerns.
The spotlight will be on the U.S. consumer price index released on Thursday, which is expected to rise sharply in the 12 months through May.
The surge in prices will likely be driven by easy comparisons from last year when consumption was depressed due to the pandemic, higher commodity prices and supply shortages.
We think that the economy is strong enough to weather the recent inflation uptick and that the bar for the Fed to change its easy momentary policy is very high.
However, a hotter-than-expected inflation reading could trigger some short-term volatility and shift interest-rate expectations.