Shares are back to start earnings week as Powell says US economy is at “tipping point.”

How are stock benchmarks performing?

• The Dow Jones Industrial Average DJIA,
  -0.30%
  Slipped 87 points to trade close to 33,714, down 0.3%.

• The S&P 500 index SPX,
  -0.22%
  gave 9 points or 0.2% against 4,120.

• The Nasdaq Composite COMP,
  -0.54%
  80 points down to about 13,820, down 0.6%.

On Friday, the S&P 500 posted a weekly gain of 2.7%, the Dow was up 2% and the Nasdaq Composite posted a weekly gain of 3.1%. The S&P 500 and the Dow posted their third weekly gains in a row, while the Nasdaq climbed two weeks in a row.

What drives the market?

On Sunday, Powell said the economy will grow strongly in the second half of the year, but stressed that the recovery should not lead anyone to believe the central bank would raise interest rates in 2021.

“I think we’re unlikely to increase rates anything like this year,” Powell said during the “60-minute” interview taped Wednesday at Fed headquarters and aired Sunday night.

Read: Wall Street will have to deal with a Fed who will do what it says

The Fed chief said the economy “appears to be at a turning point,” with strong growth “right now” and the weakness caused by the coronavirus pandemic in the rearview mirror.

Powell’s comments come as Wall Street positions itself for the start of Q1 earnings, which could provide further clues as to whether one of the market’s biggest fears is materializing: an over-hot economy and strong inflation that policymakers incentivises significantly raising rates and reversing accommodative policies earlier than expected.

So far, Fed officials have said they expect an increase in inflation to be transient and have repeatedly stated that they would focus on the full recovery of the labor market before considering easing policies.

As earnings season kicks off, “I’ll wait and see how the market responds,” said Keith Lerner, chief market strategist for Truist Advisory Services. “A lot has been priced in and the market is looking for income to confirm that this is the right move. The threshold for positive surprises has shifted. “

Lerner thinks the Fed will remain “supportive” and even if bond yields rise, the market should absorb the next leg up as long as it isn’t too steep.

“We’ve been through a very gradual, but steady, low volatility shift to new highs,” Lerner said in an interview. “I still think the primary market trend is higher, but as we move into profit I suspect we will trade a little more rangebound. If the primary trend is higher, you don’t want to worry about the hiccups. “

However, some strategists fear that stock valuations will remain high despite uncertainties such as inflation and the tax regime.

Shares largely finished at records last week and the Nasdaq Composite, after falling into correction in March – defined as down at least 10% from a recent peak – is below 2% from its all-time high. on February 12. Gains for equity benchmarks have been achieved despite concerns about out-of-control inflation and the possibility that President Joe Biden will raise the corporate tax rate from 21% to 28% to help fund his $ 2.4 trillion infrastructure proposal.

“The investment community is overly optimistic in our view and shows no concern at all about plausible tax increases proposed by the Biden government,” Citigroup research analysts Tobias Levkovich, Lorraine Schmitt and Jennifer Stahmer wrote in an April 7 research note.

“Indeed, all developments are experienced as positive news. Yet such one-sided views are usually not a good starting point, ”the Citi researchers wrote.

Meanwhile, Germany was preparing new COVID-inspired legislation that would allow the eurozone’s largest economy to impose national restrictions without regional government approval. England meanwhile reopened pubs for outdoor drinking and hairdressers.

See: The biggest ‘inflation fear’ in 40 years is coming – what investors in the stock market need to know

Which companies is the focus on?

• Shares of Nuance Communications
  NUAN,
  + 17.18%
  Monday after that increased by more than 16% Microsoft Corp.
  MSFT,
  + 0.48%
  confirmed it would buy the artificial intelligence company for about $ 16 billion.

• Regeneron Pharmaceuticals
  RAIN,
  -0.65%
  said Monday it would ask the Food and Drug Administration to expand the use of its antibody drug to people exposed to the virus who have not yet been vaccinated, suggesting possible new preventive uses for the drug, which is already in use to COVID -19 cases. Shares fell 0.4%.

• Uber Technologies Inc.
  UBER,
  + 3.74%
  Shares were up 3.3% after the company said Monday morning that total gross bookings in March hit their highest monthly level in the company’s history.

• Shares of Ingersoll-Rand Inc.
  IR,
  -0.90%
  were virtually unchanged by mid-morning on Monday, after the diversified industrial company announced a deal to sell Club Car for about $ 1.7 billion.

How are other assets doing?

• The ICE US Dollar Index, DXY,
  -0.05%
  a measure of the currency against a basket of six major rivals, fell 0.1% to 92.07.

• American crude CL.1,
  + 1.57%
  for delivery in May CLK21,
  + 1.57%
  gained $ 1.32 or 2.2% to trade close to $ 60.64 a barrel on the New York Mercantile Exchange after a 3% loss last week.

• The 10-year Treasury earns TMUBMUSD10Y,
  1,675%
  gained 1.5 basis points and traded close to 1.676% ahead of a busy week for the bond market. Bond prices move inversely with yields.

• Gold futures ticking, with the June contract GCM21,
  -0.63%
  Down $ 9.90 or 0.6% to $ 1,734.90 an ounce on Comex.

• In Europe the Stoxx 600 index is SXXP,
  -0.41%
  was 0.4% lower, while London’s FTSE 100 UKX,
  -0.33%
  fell 0.3%.

• In Asia, the Shanghai Composite SHCOMP ended 1.1% lower, Hong Kong’s Hang Seng HSI closed 0.9% and Japan’s Nikkei 225 NIK lost 0.8%.