Stocks Surge After CPI Miss – Nasdaq up 1.4%
US Stock markets surged to fresh highs in trading yesterday as a lower-than-expected result in the key CPI data pushed markets to increase Fed rate cut estimates. All three of the major US indices closed at new record highs, the Nasdaq led the way, closing up 1.4% on the day, followed by the S&P which gained 1.17%, and the Dow which added 0.88%. The dollar plunged, with the Dxy losing 0.6% and US treasury yields headed south, the 2-year dropping 8 basis points to 4.736% and the benchmark 10-year dropping 9 basis points to 4.356%. Oil prices pushed higher, with Brent gaining 0.5% to $82.75 a barrel and WTI closing up 0.8% to $78.63 a barrel. Gold jumped 1.4% to hit fresh monthly highs against the greenback, now trading above the $2,390 an ounce mark.
Fed Pricing Recalibrated After CPI Data
US Equities flew higher yesterday as bond yields took a dive after US CPI data came in slightly below expectations. The market reacted strongly to the updates which included a weaker Retail Sales result and a drop in the New York manufacturing index, but some investors feel that in reality, this is more of a relief rally that we didn’t have a fourth straight high CPI report. The market is now pricing in 52 basis points of rate cuts by the end of the year with the first cut now and 85% chance of coming at the September meeting. If we continue to get data out of the US that supports the theory of the ‘soft landing’ then expect more topside for stocks and for yields and the dollar to drop, however, if these recent data prints – which if we are honest, were not exceptional – prove to be the anomalies, then expect harder corrections in the market.
More Market Moves Ahead for Traders Today
Traders are expecting another busy day at the desk today after yesterday’s slightly lower than expected CPI print helped to spur indices to fresh highs. Asian market traders will take a breather from their US focus to watch the Australian markets early in the day as the Employment data is released down under. Expectation is for a 22k increase in employment and for the unemployment rate to creep up to 3.9%. The European session will focus on the latest ECB Financial Stability Review, although once again the big focus for the day will be on US data. The New York session sees the release of weekly unemployment claims, Building Permits, the Philly Fed Manufacturing Index, and Industrial Production numbers, and although these are not expected to have the same impact as recent PPI and CPI numbers, traders are expecting plenty of volatility around the events.
