The S&P 500 Returns to Record Highs

The Fed’s minions hit the news streams hard this past week, with most selling the message that the surge of inflation is mostly transitory and won’t require the Fed to start boosting U.S. short term interest rates before 2024. That message seemed to take hold among investors, with the S&P 500 (Index: SPX) returning to record high levels on the expectation that outlook will hold. At least for now.

In the meantime, we find the trajectory of the S&P 500 falling well within the range of the latest redzone forecast in the alternative futures chart, which is based on the assumption investors will mostly focus on the upcoming quarter of 2021-Q3 over the next several weeks.

We weren’t kidding when we said the Fed’s minions were out in force in front of the news media during the past week. Their outsized role in an otherwise slow news week is really apparent in our roundup of market-moving news headlines:

Monday, 21 June 2021

• Signs and portents for the U.S. economy:

• Oil rallies on weaker dollar and Iran supply uncertainty

Fed officials open debate on bond taper

• Analysis: Fed’s “big tent” framework may fray under inflation surge
• Fed’s Kaplan: Jump in rate expectations reaction to stronger outlook
• Fed’s Bullard: Last “taper” debate no guide what’s needed in current period
• NY Fed’s Williams: Economic conditions have not progressed enough for central bank to shift stance

• NY Fed’s Williams says recovery may be ‘choppy’ as U.S. economy returns to full strength
• NY Fed’s Williams says he is not concerned by higher use of reverse repo facility

Fed’s Powell sees ‘sustained improvement’ in economy, notable rise in inflation

ECB minions claim progress in changing inflation management policies, also claim Eurozone inflation is transitory:

• ECB makes good progress on new strategy, Lagarde says

• Euro zone and U.S. economies in “different situation”, ECB’s Lagarde says

ECB’s Centeno says euro zone inflation rise is temporary, sees no permanent effects

Wall Street ends sharply higher, led by surging Dow

Tuesday, 22 June 2021

• Signs and portents for the U.S. economy:

• Record-high U.S. house prices, tight supply weigh on sales

Fed minions on board with higher inflation, won’t raise rates anytime soon:

• Fed will not raise rates on inflation fears alone, Powell says

• Fed’s Powell sticks to transient inflation scenario on Capitol Hill

Fed’s Daly says could get to taper threshold late this year

• Fed’s Daly says climate change poses ‘significant’ economic risk

Fed’s Mester says framework needs to be more explicit on financial stability

NY Fed’s Williams says discussion about adjusting rates still quite a ways off

ECB minions say not worried about inflation running hot:

• There is no new inflation paradigm, ECB’s Lane says

Tech leads way to Wall Street rebound as Powell promises steady hand

• Nasdaq ends at record high as Big Tech roars back

Wednesday, 23 June 2021

• Signs and portents for the U.S. economy:

• U.S. economy recovering strongly, inflation not the issue -White House’s Deese
• U.S. new home sales hit one-year low; prices soar
• U.S. factory activity index rises to record high in June – Markit

Fed minions getting comfortable with not-so-transitory inflation:

• Fed officials say “temporary” inflation surge may last longer than thought
• U.S. Fed reverse repo volume hits record $813.57 billion
• Fed’s Kaplan Sparks Late-Day Dump On Rate-Hike, Taper Talk
• Bostic: Fed should avoid ‘prematurely’ declaring win in jobs battle
• U.S. Fed reverse repo volume hits record $813.57 billion

Eurozone showing positive recovery signs:

• Euro zone business growth at 15-year high as demand unleashed -PMI
• Swedish government sees faster growth as pandemic effects fade

Tesla lifts Nasdaq to record-high close, S&P 500 dips

Thursday, 24 June 2021

• Signs and portents for the U.S. economy:

• ‘We have a deal:’ Biden OK’s $1.2 trillion infrastructure plan
• U.S. jobless claims dropping faster in states ending federal benefit

Job hole or inflation? Fed policymakers split over risk view

• Analysis: Fed’s mixed messages on inflation unsettle investors
• Fed officials say employment is down significantly, businesses reluctant to hire

• NY Fed’s Williams says U.S. economy still far from maximum employment, not the time to lift rates
• Fed’s Bullard warns may be more inflation risk to come

• Bullard: Supply chains will be under pressure for ‘quite a while’

Fed’s Barkin: not at full employment, inflation rise temporary

Bigger inflation developing all over:

• BoE sees inflation breaking 3% but keeps the stimulus taps open

Nasdaq and S&P 500 end at record highs; Dow rallies

Friday, 25 June 2021

• Signs and portents for the U.S. economy:

• U.S. inflation likely to remain elevated for up to four years – BofA
• U.S. consumer spending takes breather; inflation pushes higher
• Supply constraints to slow U.S. auto sales growth in June – J.D. Power, LMC Automotive

Fed minions says inflation no big deal, Americans to go back to work in fall (after pandemic unemployment benefits expire):

• Fed’s Kashkari says inflation will be temporary, workers will return
• Fed’s Mester says investments in workforce and inclusion lead to more resilient economy
• Fed’s Rosengren says possible conditions for rate increase could be met next year

• Fed’s Rosengren says financial stability risks could interfere with labor recovery

Mixed recovery signs in Asia:

• Japan’s factory output likely fell in May, underscoring patchy recovery: Poll
• Singapore May manufacturing jumps 30% y/y, biggest gain in 10 years

Bigger inflation developing all over:

• Brazil mid-June inflation rises above 8% for first time in nearly five years
• UK inflation pressure could keep on building in 2022 – BoE’s Haldane

ECB minions really want to keep stimulus going, won’t take success as a sign to stop:

• Euro zone to recover faster than thought, still needs support -ECB

Nike, bank stocks push S&P 500 to new highs as inflation fear calms

Looking for more news? With Barry Ritholtz’ weekly summary still on vacation, you might consider tapping Bloomberg’s RSS business news feed to get a bigger picture than what we’ve focused upon in this edition!