US markets opened cautiously this week as investors waited for fresh inflation data. Tech giants dipped slightly in early trading, while companies like Coinbase and Peloton saw notable gains. Meanwhile, the dollar’s rally seems to be stalling, with investors questioning how long its strength will last. Tariffs are beginning to show a modest effect on inflation, but it’s still early to call the trend.
US Premarket Movers: Coinbase, Peloton Advance; Pinterest Falls
US equity-index futures are trading lower as investors turn their attention to upcoming inflation data. S&P 500 Index futures are down 0.3% at 6:14 a.m. in New York.
Here are some of the biggest US movers today:
- Magnificent Seven stocks edge lower in premarket trading along with stock futures. Tesla (TSLA) -1.2%, Meta Platforms (META) -0.6%, Microsoft (MSFT) -0.5%, Apple (AAPL) -0.5%, Alphabet (GOOGL) -0.4%, Amazon (AMZN) -0.3%, Nvidia (NVDA) -0.2%
- Coinbase Global (COIN) shares are up 9.3% after S&P Dow Jones Indices said the company will join the S&P 500 Index before trading opens May 19
- JD.com ADRs (JD) are down 1.6% after the Chinese e-commerce firm suffered its worst quarter of cash outflows in two years as competition with Meituan in food delivery ramps up
- Peloton (PTON) gains 1.4% as Macquarie upgrades the fitness company to outperform following last week’s third-quarter results
- Pinterest (PINS) shares fall 3.4% after the Information reported Google may unveil next week a feature that shows images designed to give people ideas for fashion and other types of designs, citing a person familiar with the matter
- Valero Energy (VLO) shares rise 0.8% after Goldman Sachs raised the recommendation to buy from neutral citing improved margins
Dollar’s Big Bounce Meets a Wall of Doubt in Options Market
The dollar pared Monday’s gains, with traders unconvinced that its recent surge on the back of easing US-China trade tensions will last long.
A gauge of the greenback’s strength fell 0.2% as positioning in the options market continues to lean against the currency. Depository Trust & Clearing Corporation data show that dollar bearish bets so far this week total around $61 billion in notional value, more than the $55 billion in bullish trades.
The dollar had its best day since the US presidential election on Monday, up 1% as the US and China agreed to temporarily lower trade tariffs. That fueled hopes the world’s largest economy will avoid a recession, and led traders to pare bets on interest-rate cuts from the Federal Reserve.
The rally was “all about the unwind of the post-Liberation day trades,” Kristoffer Kjaer Lomholt, head of FX and corporate research at Danske Bank A/S wrote in a note to clients.
Hedge funds trimmed their short-dollar exposure, as the market lacked fresh bullish demand in either spot or options, according to FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly.
Optimism that the trade truce marked the end to an all-out tariff war weighed most heavily on traditional havens like the yen and the Swiss franc on Monday, with pound bearish options following suit. In contrast, options on the euro, yuan, and Norwegian krone leaned heavily against the dollar, with roughly two-thirds of trades positioned for renewed dollar weakness.
But on Tuesday that optimism was already fading, with many firms reinforcing their view that the dollar will continue to lose ground. Deutsche Bank AG’s global head of FX strategy George Saravelos said in an interview with Bloomberg TV that real money and central banks remain wary of “concentration risk” in US assets despite a more “conciliatory direction” in the country’s policy.
“The totality of the news flow over the last few weeks favors the rest of the world more so than the US and therefore works dollar negative, especially against growth-sensitive FX,” he wrote in a note earlier.
Banks including Nordea and ABN Amro also said the greenback will decline in the long term despite the recent rebound, and lifted their forecasts for the euro and the yuan, respectively.
“While the recent events to some extent decrease the odds of a severe trade war, the constant policy U-turns still mean uncertainty about the endgame and the goals of the US administration remains high,” Nordea analysts including Jan von Gerich and Philip Maldia Madsen wrote in a note.
Options activity did pick up Monday, but remained relatively muted. It stood around 10% above the three-month average, and still 30–35% below levels seen during major headline-driven episodes, such as Germany’s suspension of its debt brake or the April 2 tariff announcement.
“The view of the US as a ‘full faith and credit’ counter-party won’t completely return soon, given the damage caused by April’s events,” wrote Macquarie strategists Thierry Wizman and Gareth Berry. “It will limit the USD’s gains, before the USD starts to depreciate again on trends that were extant even before April’s events.”
So-called risk reversals, which reflect the difference in demand between bullish and bearish options, still signal long-term bearish sentiment on the greenback, albeit with slightly less conviction than last week. “US protectionist trade policies have raised the risk the US economy enters a period of stagflation. As such, we expect USD to come under renewed downside pressure,” noted Elias Haddad, a currency strategist at Brown Brothers Harriman & Co.
US Inflation Seen Picking Up in April With Modest Tariffs Impact
US inflation likely accelerated in April after an unexpected cooldown the previous month, with higher tariffs on Chinese goods in particular starting to impact prices.
The consumer price index is seen rising 0.3% from March after declining in the prior month, according to the median forecast in a Bloomberg survey of economists. A core metric that excludes the often volatile food and energy categories advanced at a similar pace, based on the consensus.
Most forecasters say Tuesday’s report by the Bureau of Labor Statistics will show the first signs of the punishing tariffs implemented on China last month as well as other duties. The impact may be limited because many imported goods on US shelves last month arrived in the country before the new levies came into effect.
CPI categories that are China import-intensive — such as toys, shoes, and apparel – may see modest inflation,” Bloomberg Economics forecasters led by Anna Wong wrote in a noteMonday. “Retailers are finding it difficult to pass on higher prices without suffering a sharp drop in demand — though they’ll still try. If that effect prevails, then the net impact of tariffs will be less inflationary than commonly thought.”Going forward, forecasters are still assessing the recent agreement between the US and China to temporary lower tariffs on each others’ products. It could lead to a “catch-up period” when retailers rush to restock inventories and items on US shelves are scarce, which could fuel consumer-price growth, Bloomberg Economics wrote.
Goods Front-Loading
Bank of America economists estimate goods inflation excluding food and energy commodities rose 0.1% in April after declining in the prior month.
“Tariffs should be a modest boost to goods prices this month, but larger increases are in the pipeline,” Stephen Juneau and Jeseo Park wrote last week — before the 90-day trade pact was announced. Within that category, they anticipated higher car prices “due in part to front-loaded demand in anticipation of higher prices from tariffs.”
Other economists anticipate the impact from the extra levies was limited.
The CPI report is expected to be “largely unaffected” by the tariffs President Donald Trump announced on April 2, Julien Lafargue, chief market strategist at Barclays Private Bank, said in a note Monday. That’s because exemptions were granted for goods that were already on the way to the US, and consumers and businesses rushed to buy products earlier in the year to avoid tariffs.
“Both the Fed and global investors will still need to be a bit more patient before they can properly assess the impact of the trade uncertainty on consumer prices,” Lafargue said.
On the groceries front, economists at Morgan Stanley and Pantheon Macroeconomics noted a notable decline in egg prices — a key driver of food inflation in the CPI data this year through March. A drop in bird flu cases may have provided some relief.
Services Weakness
Economists and policymakers are closely tracking certain services categories that are a barometer for changes in discretionary spending.
Citigroup Inc. economists say travel-related categories such as airfares and car rental saw prices drop for another month. The price weakness reported in March, and a further pullback in April, would support the view that travel demand softened, economists Veronica Clark and Andrew Hollenhorst wrote.
The shelter category — which includes rents and is the biggest by far in the index — is seen cooling after a strong increase in March.“Looking ahead, we still doubt the tariffs will prevent services inflation from continuing to fade gradually, enabling the Fed to start easing policy again in the second half of this year,” Pantheon Macroeconomics economists Samuel Tombs and Oliver Allen wrote in a note Monday.
Conclusion
This week’s developments show how global trade tensions, inflation concerns, and investor sentiment are tightly connected. As always, markets react not just to news but to expectations. With inflation data on the way and the Fed’s next moves uncertain, cautious optimism may be the tone for investors in the coming days.
Source: Bloomberg
