Stocks Surge After the Fed – Nasdaq up 1.5%
US tech stocks surged higher in trading yesterday as investors took a glass half full approach to conflicting updates from US data and the Fed. CPI data came in lower than expected bringing in expectations of rate cuts, however the Fed indicated that only one rate cut will be coming this year later in the day. Both the Nasdaq and the S&P yet again hit fresh highs, up 1.53% and 0.85% respectively, while the Dow finished close to flat, down just 0.09%. Treasury yields fell on the day, the 2-year losing 7.6 basis points to trade down to 4.475% and the 10-year dropped 8 basis points to 4.322%. Currencies experienced a whippy day with the dollar ultimately finishing down 0.5% on the index and commodities gained ground in line with the weaker greenback. Oil prices were up around 0.8%, with Brent closing at $82.60 and WTI at $78.50, while Gold closed just 0.3% up at $2,322 per ounce.
Fed Reaction to Resonate Around Markets Today
Markets are likely to spend the next few sessions digesting the updates that we received from the US last night and the overarching message, despite a weaker CPI print is that the Fed is only lining up one rate cut this year. It is likely that the market reaction will take several sessions and days to bed in, and it could take a while for longer term players to make adjustments to their trading strategies. US Stocks rallied again and remain at all-time highs, but some observers are starting to see some of the usual correlations break down and that could mean some corrections in the market. The ‘soft landing’ narrative is being embraced by investors and we are still in a ‘buy dips’ environment, but astute players will be watching data even closer in the months ahead and will have bail out plans in place if things start to look a bit different and they are forced to take their rose-tinted glasses off. It should be an interesting few trading months ahead!
More inflation Data in Focus Today
Asian markets are set to open in a positive mood today after a strong post-Fed rally on Wall Street overnight and investors will be hoping for the momentum to carry through the trading day. Australian traders will be on their toes early in the APAC day with the latest employment data due out. Expectations are for a monthly increase of 30k jobs last month with the Unemployment rate dropping to 4% and anything significantly off those prints should see further volatility in the Aussie. The European session has little to offer in terms of economic data releases but the New York open will see fresh inflation updates for the states, this time in the form of PPI numbers. The weekly unemployment claims data is due out at the same time and we are also due to hear from Treasury Secretary Janet Yellen later in the day.
