US Stocks Dip as Powell Pulls Back Rate Cut Hopes – Nasdaq Down 0.6%
US stocks fell in trading yesterday as Jerome Powell indicated that he saw no need for the Fed to rush interest rate cuts. All three major indices declined on the day, with the Dow losing 0.47%, the S&P 500 down by 0.61%, and the Nasdaq dropping 0.64%. US Treasury yields had another mixed day as they continued to trade at multi-month highs; the 2-year yield pushed higher, adding 5.9 basis points to reach 4.343%, while the 10-year yield fell by 1.2 basis points to 4.439%. The dollar continued its upward drive, gaining another 0.38% on the DXY, trading up to 106.90. Oil prices also rose, with both Brent and WTI adding 0.4% on the day, closing at $72.56 and $68.70 per barrel, respectively. Gold saw another drop, hitting a two-month low and closing down by 0.64% at $2,563.89.
Buy Dollars, Wear Diamonds
The old adage has resurfaced over recent weeks, gaining momentum since the US election and last week’s Fed cut. The dollar index reached annual highs in overnight trading and is close to breaking 2023 highs as the Asian markets open this morning. This move was further driven by Fed Chair Jerome Powell’s comments, indicating he does not see a need to cut rates quickly. Whether this stance stems from stronger-than-expected data, anticipation of inflationary policies from the new administration, or a combination of both, remains unclear. However, many market participants find it reasonable. The current question in FX circles is where fair value for the dollar lies, with many analysts assessing various scenarios around that question over the next few weeks. For now, the trend remains positive, and those long on the dollar may find themselves heading to the jewellery shops this weekend!
Another Busy Friday to Close the Week for Traders
Today promises to be another active day for traders, wrapping up a volatile week with macroeconomic data releases scheduled across all three trading sessions. China will be in focus mid-session with key Industrial Production and Retail Sales data expected, and investors will be hoping for positive figures to break recent trends. The UK will also be in the spotlight early in the European session with the release of the latest GDP data, with expectations set for a 0.2% increase in both monthly and quarterly figures. Additionally, the US will release tier 1 data today, with Retail Sales numbers and the Empire State Manufacturing Index set for publication, although traders expect recent sentiment to remain dominant.
