Shares are backtracking to start earnings week, as Powell says the US economy is at a “turning point”

How do stock benchmarks work?

• The Dow Jones Industrial Average DJIA,
  -0.28%
  it fell 87 points to close to 33,714, down 0.3%.

• The S&P 500 SPX Index,
  -0.21%
  yielded 9 points, 0.2%, with 4,120.

• The Nasdaq Composite COMP,
  -0.53%
  fell 80 points to about 13,820, a drop of 0.6%.

On Friday, the S&P 500 posted a weekly gain of 2.7%, the Dow rose 2% and the Nasdaq Composite posted a weekly gain of 3.1%. The S&P 500 and Dow posted their third consecutive weekly gain, while the Nasdaq has risen two weeks in a row.

What is driving the market?

On Sunday, Powell said the economy will begin to grow strongly during the second half of the year, but stressed that this rise should not lead one to believe that the central bank would mark interest rates in 2021.

“I think we’re unlikely to raise rates like this year,” Powell said during the “60-minute” interview that was recorded at Fed headquarters on Wednesday and aired on Sunday evening.

Read: Wall Street faces a Fed that will do what it says

The Fed chief said the economy “seems to be at a turning point,” with strong growth “right now” and the weakness caused by the coronavirus pandemic in the rearview mirror.

Powell’s comments come as Wall Street positions itself for the start of first-quarter corporate earnings, which could offer additional clues as to whether one of the market’s biggest fears comes to fruition: an overly hot economy and an increase in inflation forcing policymakers to substantially raise rates and re-mark accommodation policies earlier than expected.

So far, Fed officials have said they expect the rise in inflation to be transitory and have repeatedly stated that they would be focused on ensuring that the labor market recovers fully before a policy of easing is considered.

As the earnings season begins, “I’m looking forward to seeing how the market reacts,” said Keith Lerner, chief market strategist at Truist Advisory Services. “There has been a lot of trading and the market is looking for gains to confirm that this is the right move. The obstacle rate for positive surprises has increased.”

Lerner believes the Fed will remain “supportive” and even if bond yields rise, the market should absorb the next stage higher as long as it is not too pronounced.

“We’ve had a very gradual but steady, low-volatility step toward new highs,” Lerner said in an interview. “I still think the primary market trend is higher, but as we move toward profits, I suspect we’re starting to trade a little further away. When the main trend is higher, you don’t want to worry about hiccups.”

Some strategists fear, however, that stock valuations will remain high despite uncertainties including inflation and the tax regime.

Most stocks ended in records last week and the Nasdaq Composite, after falling in correction in March (defined as a drop of at least 10% from the recent peak), remains at less than 2% from the its maximum closing on 12 February. Earnings for equity indices have come despite concerns about uncontrolled inflation and the possibility of President Joe Biden raising the corporate tax rate from 28% to 28% to help fund his proposal for $ 2.4 trillion infrastructure.

“The investment community is too optimistic in our view, and shows no concern about the plausible tax increase proposed by the Biden administration,” wrote Citigroup research analysts Tobias Levkovich, Lorraine Schmitt and Jennifer Stahmer , in a research note dated April 7th.

“In fact, all developments are perceived as positive news. However, these unilateral views are not usually a good starting point, “wrote Citi researchers.

Meanwhile, Germany was preparing new COVID-inspired legislation that would allow the eurozone’s largest economy to impose national restrictions without regional government approval. Meanwhile, England reopened outdoor drinking pubs and hairdressers.

See: The biggest “inflation scare” is approaching in 40 years, what stock market investors should know

Which companies are concentrated?

• Actions of Nuance communications
  NUAN,
  + 17.17%
  rose more than 16% Monday after Microsoft Corp.
  MSFT,
  + 0.37%
  he confirmed he would buy the artificial intelligence company for about $ 16 billion.

• Regeneron Pharmaceuticals
  RAIN,
  -0.81%
  said on Monday that it would ask the Food and Drug Administration to expand the use of its antibody drug among people exposed to the virus who have not yet been vaccinated, suggesting possible new preventive applications for the drug, which is already being used to treat the COVID. -19 cases. Shares fell 0.4%.

• Uber Technologies Inc.
  UBER,
  + 3.50%
  shares were 3.3% higher after the company said Monday morning that general gross reserves reached their highest monthly level in the company’s history in March.

• Actions of Ingersoll-Rand Inc.
  IR,
  -0.76%
  they remained virtually unchanged Monday mid-morning, after the diversified industrial company announced a deal to sell Club Car for about $ 1.7 billion.

How are the other assets?

• The US Dollar Index ICE, DXY,
  -0.03%
  a measure of the currency against a basket of six main rivals fell 0.1% to 92.07.

• American crude CL.1,
  + 1.65%
  for May delivery CLK21,
  + 1.65%
  it earned $ 1.32 or 2.2%, to trade about $ 60.64 a barrel on the New York Stock Exchange, after losing 3% last week.

• The 10-year Treasury note generates TMUBMUSD10Y,
  1.675%
  gained 1.5 basis points to trade close to 1.766% before a very busy week for the bond market. Bond prices move inversely toward yields.

• Gold futures fell, with the June GCM21 contract,
  -0.69%
  $ 9.90 or 0.6% lower, to $ 1,734.90 per ounce of Comex.

• In Europe, the Stoxx 600 SXXP index,
  -0.43%
  was 0.4% lower, while the FTSE 100 UKX in London,
  -0.31%
  fell 0.3%.

• In Asia, the Shanghai Composite SHCOMP finished 1.1% less, the Hong Kong Hang Seng HSI closed 0.9% and the Japanese Nikkei 225 NIK lost 0.8%.