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Major market averages remained relatively muted on Monday as investors enter the sell-in-May-and-go-away period.
The Dow (DJI) gained 0.2%, S&P 500 (SP500) was flat, while the Nasdaq Composite (COMP.IND) dipped 0.1%.
Markets in Europe were closed for the May 1 (Labor Day) holiday.
Focus was on regional banks as FDIC took struggling First Republic into receivership, with JPMorgan Chase (JPM) ready to take control of deposits. FRC plunged to just above $2, while JPM rose nearly 3%.
But big moves may be unlikely with the Fed decision coming Wednesday. Fed funds futures price in an 85% chance of a quarter-point hike, with cuts still expected by the end of the year.
The 10-year Treasury yield (US10Y) rose 6 basis points to 3.51%. The 2-year yield (US2Y) was up 6 basis points at 4.12%.
“Markets and policy makers believe that little progress is being made on inflation,” Standard Chartered strategist Steve Englander wrote. “Fed commentary emphasizes that ‘there is more work to do’ to get inflation down to acceptable levels. We think the data present a more sanguine picture on the evolution of inflation.”
“Before March PCE inflation data were released we argued that the case for the Fed delaying a hike was compelling,” he said. “Contrary to the market view, we think the March PCE data reinforce that case. Core PCE ex-shelter inflation is falling steadily. The 12-month pace is under 4%, the 6-month pace is under 3% and the latest March m/m reading annualizes to under 2%.”
The April ISM manufacturing index came in at 47.1 versus the economists predicted 46.8 level.
Moreover, March construction spending arrived at 0.3% compared to the anticipated 0.1% figure.
