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Dow Futures Gain, Nasdaq Slides as Bond Yields Jump on Delayed PPI Data

U.S. stocks could test another round of record highs Friday, but persistent inflation concerns are moving Treasury yields and clipping gains for tech stocks.

The Friday Market Minute

  • Global stocks hit records highs, but Wall Street is set for a mixed open as inflation concerns resurface following faster-than-expected PPI data from the U.S. and China.
  • Factory gate prices rise 4.4% in March, the fastest pace since 2018, suggesting near-term price increases ahead from the world's biggest exporter.
  • Benchmark 10-year note yields bump 6.5 basis points to 1.685%, while the dollar index rebounds 0.4% from a two-week low to trade at 92.388.
  • CDC data shows 66.2 million Americans have now been fully vaccinated against the coronavirus, with around 175 million doses administered as of Thursday.
  • U.S. equity futures suggest a mixed open on Wall Street ahead of delayed producer price inflation data.

U.S. equity futures traded mixed Friday, with tech stocks set for a modest decline amid another move higher in Treasury yields following a notable rise in factory gate inflation from the world's biggest exporter.

The downside moves were accelerated by a faster-than-expected reading for March PPI in the U.S., which surged 4.2% from last year -- and 1% on the month -- in a release that was affected by a cash on the Bureau of Labor Statistics website.

Producer price inflation in China accelerated at the fastest pace in three years last month with a 4.4% surge, official data indicated, suggesting higher input costs from recovering commodity prices will be passed on to importers -- and end consumers -- in the coming months.

"We think there will be upward pressure on prices which may be passed along to consumers in the form of price increases," Federal Reserve Chairman Jerome Powell told an IMF panel discussion yesterday. "We think that that will be temporary," Powell said, noting that inflation has been low for 25 years, feeding into a psychology of low inflation expectations."

"If inflation were unexpectedly, counter to our expectations, to move meaningfully above levels where we are comfortable - and in particular inflation expectations," he added. "If we see them moving persistently and materially above levels we are comfortable with, then we would react to that."

With yet another component of faster inflation simmering under the accelerating global economic recovery, and central banks repeating their pledges to keep interest rates low and liquidity spigots at full speed, traders moved out of longer-term bond markets, lifting Treasury yields and sparking a modest rebound for the U.S. dollar. 

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Benchmark 10-year Treasury note yields rose five basis points to 1.685% in early New York dealing, while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, jumped 0.24% to 92.388.

Futures contracts tied to the Dow Jones Industrial Average indicate a 45 point opening bell gain, while those linked to the S&P 500, which closed at another record high last night, are priced for a modest 3point dip that would keep the broadest benchmark of U.S. shares near the 4,100 point threshold.

Nasdaq Composite futures, however, are looking at an 85 point decline to start the final trading day of the week.

Notable pre-market movers include Boeing  (BA) - Get The Boeing Company Report, which slipped 0.5% after issuing an alert to some of its customers linked to a potential electrical issue in the 737 MAX, and General Electric  (GE) - Get General Electric Company Report, which jumped 1.2% following a price target boost from UBS.

In Europe, stocks were largely flat on the session after hitting all-time highs in the early Thursday session, with markets digesting conflicting signals from Germany, the region's biggest economy, which posted stronger-than-expected February exports but remains deeply in the throes of a worrying resurgence in coronavirus infections.

The Stoxx 600 was marked 0.01% lower in late-morning trading in Frankfurt, with Britain's FTSE 100 rising 0.05% in London.

Overnight in Asia, the broadest measure of worldwide stocks hit an all time high of 692.85 points in the early portion of the session, but the faster factory gate inflation from China pulled the region-wide MSCI ex-Japan 0.46% lower in the session, while the Nikkei 225 ended the week with a modest 0.2% gain to peg the index at 29,768.06 points.