Stocks Crash After Hot Inflation Print – Nasdaq Drops 1.8%
US stocks markets took a big hit yesterday as inflation numbers came out much higher than expected, pushing rate cut expectations further away. The Dow dropped 1.35%, the S&P lost 1.36% to close back under 5000 and the Nasdaq fell 1.77%. The dollar shot higher against all the majors to hit a 3-month high, the DXY gaining 0.7% on the day with the UsdJpy noticeably shooting back up through 150.00 to top out just short of the 151.00 level. US Treasury yields jumped, with the benchmark 10-year hitting at 10-week high, gaining 14 basis points to close at 4.31%, the rate sensitive 2-year surged even further, gaining 18 basis points to 4.65%. Oil had a whippy day after first rallying on the back of geopolitical tensions before being reigned back by the stronger dollar to close back near opening levels, and Gold took a pounding after the data, dropping through the $2,000 level to hit a 2-month low, closing the day down 1.3% at $1,993.30 per ounce.
CPI Result Pushes the Fed Cut out to June.
Last nights unexpectedly strong CPI print has thrown the cat amongst the rate cut pigeons with expectations for a May cut now drastically reduced and hopes for a March easing extinguished. The data backs up recent FOMC rhetoric that inflation may remain sticky and pushed back on the pace and extent of anticipated cuts from the Fed for this year. As recently as mid-January the market was fully pricing in a cut in May with a 175-basis point reduction for the whole year, now we are looking at just a 34% chance of a cut in May and 90 points for the year. Markets have initially reacted strongly to the data but many investors fear that there could be more pain to come in US and global stocks whilst dollar bulls are gearing up for the greenback to power higher over the next few sessions.
Busy Trading Day Ahead for Markets
Asian bourses are set to open on the back foot today after US markets crashed following a surprise uptick in inflation numbers last night. There is nothing of note on the macroeconomic calendar during the session today and therefore investors are expecting the negative momentum to push through the day. The European session once again has a heavy UK focus with the key CPI data due out in London, before the Bank of England’s Andrew Bailey testifies in front of the Economic Affairs Committee at the House of Lords. There is little on the calendar in the New York session as well today although we do have input from FOMC member Michael Barr when he speaks in Washington DC, however given last night’s CPI surprise, traders are expecting a far from quiet trading day ahead.
