Stocks Down On Profit Taking, Growth And Earnings Come Into Focus  Image: Bigstock Stocks closed lower yesterday as profit taking set in. The economy continues to do well. But two topics are getting more and more airtime: inflation, and worries over renewed pandemic lockdowns slowing the economy. Regarding inflation, both the Fed and the Treasury Secretary have tamped down fears of inflation by saying it's transitory due to base effects (the small inflation readings last year at this time are exacerbating this year's higher readings due to the easy comparisons), and supply chain disruptions. Even the 10-Year Treasury yield itself has effectively tamped down the idea of inflation as it's fallen by -33.1% from the peak inflation hysteria earlier in March. Traders have also begun to worry that a rise in Covid cases, not just in the U.S., but around the world, could slow the global economic recovery. A few tenths of a percent in the U.S would not mean that much given that full-year GDP is already expected to come in at 7.0%, which would be the fastest pace in 37 years. But if we indeed get an infrastructure bill, that would pump even more money into the economy, helping to offset any moderation and more. It's ironic that the two 'concerns' in the marketplace right now are inflation (too hot of an economy), and a potential slowing down due to a resurgence in the case counts (too slow of an economy). Leave it to the market to take such a schizophrenic position. In the meantime, earnings season is off to a great start. And that's always an exciting time since stocks typically go up during earnings season. In addition, we've got a full slate of economic reports on deck this week starting with Housing Starts and Permits, and the Redbook retail sales report this morning. Should be a busy week. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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