Stocks were lower mid-week as investors weigh positive earnings and economic recovery against the backdrop of elevated inflation and higher interest rates. On Monday, Treasury Secretary Yellen conceded that the Federal Reserve may have to hike interest rates to ensure that the economy does not overheat. Later, Yellen clarified her comments, indicating that she is not predicting or recommending rate hikes. Federal Reserve Chair Powell has signaled that the central bank wants to see more economic strength before even contemplating slowing asset purchases or raising rates. The focus will turn to the next Fed meeting in mid-June, where investors will be on the lookout for any comments regarding tapering asset purchases and the future path of interest rates. As earnings season continues, it appears that the impressive earnings beats seen thus far were already priced into valuations, and earnings in aggregate have not yet caused markets to break one way or the other. On the economic front, ADP Payrolls came in lower than expected at 742,000 versus expectations of 830,000. The main event this week will be the non-farm payrolls report slated for Friday, where markets are expecting to see nearly 1 million new jobs added in April.

Source: GSAM, CNBC, JPM, FactSet, FactorInvestor

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