Stocks Slip as Higher Crude Prices Boost Inflation Expectations
The S&P 500 Index SPY is down -0.04% today, while the Dow Jones Industrial Average DIA and Nasdaq 100 Index QQQ are down -0.14% and -0.15%, respectively.
Higher crude oil prices are putting pressure on stock indices, boosting inflation expectations and T-note yields. WTI crude oil has risen more than +2%, pushing the 10-year T-note yield up by +3.5 bp to 4.680%. Energy stocks are bucking this trend, with APA Corp APA up over +5% and Occidental Petroleum OXY and Marathon Petroleum MPC up over +4%.
However, not all energy companies are faring as well. The price of WTI crude oil is also underpinning inflation expectations, which are weighing on T-note prices. The Treasury will auction $125 billion of T-notes and T-bonds this week, beginning with a $58 billion auction of 3-year T-notes on Tuesday.
The outlook for strong Q2 earnings remains bullish for stocks, with the S&P 500 tracking for earnings growth of almost 32% in Q2. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.