Investors Cautious Ahead of Tomorrow’s Inflation Report…..

U.S. equities finished out the day lower, with Financial and Industrial issues putting additional pressure on the Dow amid a decline in Treasury yields as of late. However, the losses were kept in check as investors remained cautious ahead of the first look at May’s inflation landscape with the release of the Consumer Price Index tomorrow. The major indices continued to flirt with fresh record highs amid the optimism of the economic recovery, but sentiment was likely held at bay with uncertainty regarding the monetary policy implications of rising inflation pressures persisting ahead of the Fed’s policy decision next week. Treasuries gained ground on the fall in yields and the U.S. dollar ticked higher, while gold traded modestly lower and crude oil prices nudged to the downside. On the equity front, Campbell Soup Company missed quarterly earnings forecasts and lowered its guidance due to headwinds including a rising inflationary environment, while Sherwin-Williams Company increased its guidance but also warned of higher costs. Economic news was in short supply, with the only reports of note being a decline in mortgage applications and an unrevised read on wholesale inventories. Markets in Europe and Asia finished mixed following some economic data in both regions, as well as potentially some trepidation ahead of tomorrow’s U.S. inflation report and the European Central Bank’s monetary policy decision.

The Dow Jones Industrial Average declined 153 points (0.4%) to 34,447, the S&P 500 Index shed 8 points (0.2%) to 4,220, and the Nasdaq Composite decreased 13 points (0.1%) to 13,912. In moderately-heavy volume, 942 million shares were traded on the NYSE and 5.6 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.09 lower to $69.96 per barrel. Elsewhere, the Bloomberg gold spot price declined $3.21 to $1,889.68 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.1% to 90.15.

Mortgage applications decline, wholesale inventories unrevised, Treasury yields falling….

The MBA Mortgage Application Index declined by 3.1% last week, following the prior week’s 4.0% decrease. The drop came as the Refinance Index fell 5.1% to more than offset a 0.3% gain in the Purchase Index. The average 30-year mortgage rate dipped 2 basis points (bps) to 3.15%.

April wholesale inventories were unrevised at a 0.8% month-over-month (m/m) gain, in line with expectations and compared to March’s upwardly-revised 1.2% rise. Sales also rose 0.8% after March’s downwardly-revised 4.3% gain.

Treasuries were higher, as the yield on the 2-year note was little changed at 0.15%, while the yields on the 10-year note and the 30-year bond declined 5 bps to 1.49% and 2.17%, respectively.

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