US OUTLOOK/OPINION: Mixed Opinions On April CPI Tariff Impact (1/2)

• Stocks have rebounded from midday lows, the S&P eminis narrowly outperforming the DJIA and Nasaq indexes in late Monday trade. Currently, the DJIA trades up 420.12 points (1.04%) at 40632.29, S&P E-Minis up 68.5 points (1.27%) at 5459.75, the Nasdaq up 163.7 points (1%) at 16887.7.
• Information Technology sector shares still lead gainers in late trade despite ongoing tariff uncertainty after Trump denied that US officials said smartphones, computers, and other consumer electronics were excluded from tariffs over the weekend.
• "There was no tariff exception" announcement Trump said, while officials are "looking at chips, whole electronics supply chain; chips to be assessed in national Security tariff probes." Nevertheless, "markets very strong once they got used to tariffs" Trump just posted.
• Stocks appeared to gain support after midday on a couple items: Pres Trump said he was "exploring possible exemptions to his tariffs on imported vehicles and parts" while Fed Gov Waller called for "flexible" monetary policy while also maintaining his view that the inflationary effects of tariffs are likely to be temporary.
• Late session gainers included Palantir Technologies +5.22%, First Solar +5.00%, Western Digital +4.65%, Enphase Energy +4.63%, Dell Technologies +4.25% and Intel +3.72%. Other gainers included Charles River Laboratories +6.25%, Ford Motor +4.02%, Citigroup +3.72% and Aptiv +3.61%.
• Health Care sector shares underperformed in late Monday trade, namely Humana -4.01%, DaVita -3.61% and UnitedHealth Group -2.74%. Other laggers included Southwest Airlines -2.63%, Meta Platforms -1.87% and Broadcom -1.80%.
• Earnings expected Tuesday: PNC Financial Services, Bank of America, Johnson & Johnson, Sandisk Corp, Albertsons Cos, Citigroup, Interactive Brokers, JB Hunt Transport, United Airlines and Omnicom Group.

• RES 4: 151.30 High Mar 3   
• RES 3: 149.60/151.21 50-day EMA / High Mar 28 and reversal trigger 
• RES 2: 147.80 20-day EMA
• RES 1: 144.64/146.54 High Apr 11 / Low Mar 11 recent breakout point   
• PRICE: 143.35 @ 15:51 BST Apr 14
• SUP 1: 142.07 Low Apr 11    
• SUP 2: 141.65 Low Sep 30 ‘24
• SUP 3: 141.00 1.236 proj of the Feb 12 - Mar 11 - 28 price swing
• SUP 4: 140.32 Low Sep 17 ‘24

The trend condition in USDJPY remains bearish and Friday’s fresh cycle low reinforces this theme. The move down confirms a resumption of the downtrend and maintains the price sequence of lower lows and lower highs. Note too that moving average studies are in a bear-mode position highlighting a dominant downtrend. Sights are on 141.65 next, the Sep 30 ‘24 low. Initial firm resistance to watch is 147.80, the 20-day EMA.        

A few other items of note from Gov Waller's speech:

• It would appear that the FOMC's marked-to-market core PCE expectation for March is in-line with analysts' after last week's CPI and PPI reading - he says "Core PCE prices are estimated to have risen less than 0.1 percent for the month...leaving core PCE inflation at 2.7 percent over the previous 12 months". As we noted in our US Inflation Insight out earlier today, analyst estimates for core PCE appear to have coalesced around a ‘low’ rounded 0.1% M/M in March (released Apr 30).
• Unlike some other FOMC members, Waller is clearly emphasizing market-based inflation expectations as a better guide compared to their survey-based counterparts: "I tend to discount survey-based measures of inflation and prefer those based on the spread between nominal and inflation-indexed securities, since investors have more skin in the game than survey respondents. These market-based measures have not increased significantly, which implies market participants view tariffs as a one-time change to the price level. So I don't think expectations have become unanchored."
• On policy restrictiveness: "I continue to believe that monetary policy is meaningfully restricting economic activity and hope that underlying inflation may moderate over the course of the year, separate from the tariff effects."
• He sees the economy as having been in "good shape in the first quarter". He expects GDP grew modestly in Q1, noting "special" factors weighing on growth that are unlikely to continue (including an import spike and harsh weather hurting consumer spending) and saying that "soft" data "hinted at a substantial slowdown" but "hard" data "have tended to show that the economy grew modestly".