US Stocks Rally After Stronger PPI – Nasdaq up 0.75%
US Stock markets rallied yesterday despite stronger-than-expected headline figures for PPI data out of the states. The details were more mixed with some key parts that contribute to the Fed’s favoured inflation gauge coming in more muted and investors took this as a positive sign in terms of rate cuts. The Dow rose 0.32%, the S&P 0.48% with the Nasdaq taking out line honours gaining 0.75% on the day. The dollar dropped with the dollar index losing 0.21% on the day and US Treasury yields fell, both the 2-year and 10-year losing 4 basis points on the day to close at 4.819% and 4.445% respectively. Oil prices dropped however, with Brent falling 1.18% on the day to close at $82.38 per barrel and WTI lost 1.39% to trade down to $78.02. Gold gained in line with the dollar depreciation, rising 0.86% to close around the $2,358 mark.
Key Inflation Data in Focus for Markets Today
Investors have one of the key US data releases out of the way this week with the PPI data giving overall mixed results to the market, but many consider last night’s data to be almost second tier to today’s CPI print with such a heavy focus for the Fed on inflation. Fears of ‘stagflation’ in the US are starting to creep into daily chat in the market and a stronger result tonight could push those fears even higher. Investors took a ‘glass half full’ approach to the PPI result despite the headline numbers being stronger and comments later in the day from Fed Chair Jerome Powell were also taken in a dovish context. However, this could all be undone very swiftly today if the CPI prints higher than the expected 0.2% increase for the headline number or 0.3% increase for the core data. If the CPI does in fact indicate ‘annoyingly sticky’ inflation whilst other indicators are pointing to a slowing economy, then traders are expecting to see some hard corrections in the market.
Another Busy Day Ahead for Traders
Asian markets are set to open on the front foot again today after Wall Street absorbed stronger PPI data well and all the major indices pushed higher. Attention will move to the Australian market early in the session with the release of the Quarterly Wage Index data due out in the Sydney trading morning. Market expectation is for a 0.9% increase and anything north of this will put more pressure on the RBA to keep rates high. There is little out in the European session and once again the main focus of the day will be on the US, in addition to the CPI data, Retail Sales numbers and the Empire State Manufacturing Index data are due out. However, most investors expect the CPI number to dominate moves over the session and probably into the next couple of days.
