Powell's speech, commodities on the rise: Top takeaways

Inflation data, in all its forms, has been under a microscope as the Federal Reserve has made it clear that it wants more data to inform its next decision on interest rates. Fed Chair Jerome Powell made a speech on Wednesday reiterating the point that it relies on inflation data, that inflation is on a "bumpy" path to the target goal, and that an interest rate cut is likely to happen within the year.

Commodities have been on the rise as inflation remains and supply issues have boosted prices for commodities like golld (CC=F), while the energy sector continues to perform poorly in the long term, but may have room to grow

Yahoo Finance Reporter Josh Schafer joins Market Domination Overtime to break down the top takeaways from the trading day for April 3.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

JOSH LIPTON: Joshua Schafer is here with a look at some of the key themes from today's action. Joshua.

JOSH SCHAFER: Yeah, Josh. I think inflation was the big story today again, with specifically of course, we had Jay Powell talking extensively about inflation for a long period of time today, but also we had more data out on inflation. And since apparently the prices paid index from ISM is the new thing we all love to follow and that was our big market narrative this week, when you think about what we saw earlier from the prices paid index in terms of manufacturing data-- that was hot, right? And we were all worried about inflation and goods inflation potentially spiking there.

But this morning, we got the services index and the prices paid there. Prices paid hit its lowest level since March, 2020, in the services index. And last time I checked, the thing we talk about more with inflation is services. So economists largely reacted positively to this news saying that this is good sign. It's a good sign for super core inflation, which you hear the Fed talk about a lot and that being on track to coming back down to 2%.

And I guess maybe my prevailing takeaway putting those two together would just be bumpy. We're not going to get clean-- seriously though. Like we're not going to get clean data, right? If we're going to sit here and put a microscope on every little print, it's not going to keep telling you a consistent story. And so maybe just zoom out and maybe listening to what Jerome Powell is saying about, we think it's coming down eventually, it's going to be bumpy, is rather intuitive right now.

JOSH LIPTON: And so he says it's going to be-- he sticks to his narrative. It's going to be bumpy, but on our way back down to my 2% target, despite though, Josh, even what we're seeing in the commodities complex.

JOSH SCHAFER: Yeah, I mean, commodities are spiking, right? Commodities are ripping when you look at, basically, across the board, right? Jared just hit on oil. Look at Gold. I think it hit another all time high at some point today. Silver spiking, copper spiking. And what's been interesting to me, has that's been the trade we've seen in equities too, right? Energy, , again leading today. It wasn't the leading sector, but it was one of the leading sectors extending it's lead for the year.

Even when you look inside industry like industrials, which was also up today. Some of the stocks that have been up there really do sort of relate to commodities in that sense. So it's been interesting to see investors chase that trade a little bit, go into some of those commodity specific sectors. And one thing I wanted to highlight guys, in energy specifically, was Datatrek did an interesting little analysis on this the other day. They posted this yesterday morning.

Datatrek research, great team over there. And what they highlighted was the energy is still kind of chasing the S&P 500. When you take a look at its performance over the last 100 days, the trailing returns. So you can see the S&P 500 there is below the zero level, meaning it's still lagging. Like we're talking a lot about energy outperforming this year. And yes, it is. If you look at a six month of the sectors, it's the worst performing sectors though.

JULIE HYMAN: Right.

JOSH SCHAFER: And so Datatrek essentially making the point that if this bid in energy is real, which they think it is, it probably has more room to run because a lot of people, when you talk to different oil analysts right now, the argument for oil prices would be if anything they might go up, and that would also be good for the energy sector.

- But Jay Powell says, well, that's not necessarily going to feed through into inflation. That's going to be the main-- the key to see whether it does feed through.

JOSH SCHAFER: And with that, just if it does feed through, it would be interesting to see how consumers sort of react to that, right? Because we know the Fed likes to dismiss it, but at some point, you would think it probably impacts things like gas prices and maybe then it hurts, I guess, how people are feeling about inflation. We like to talk about that.

JULIE HYMAN: Maybe.

JOSH SCHAFER: Or, maybe it doesn't, Julie. I don't know.

JULIE HYMAN: I don't know.

JOSH SCHAFER: We'll find out.

JULIE HYMAN: OK, thanks, Josh.