US Stocks Hit on More Hike Concerns – S&P down 1.2%
US stock markets were hit hard yesterday after another strong data print indicated that the Fed’s job is not yet done in terms of inflation. Core Retail Sales data were printed much higher than expected (1% vs 0.4% expectation) and sentiment was also knocked after a report hit the market that Fitch may be looking at downgrading multiple banks. The combination leading to some sharp corrections in the indices, the Dow closed the day down 1.02%, the Nasdaq lost 1.14% and the S&P dropped 1.16%. The dollar had a relatively muted reaction but remains well on the front foot against most of the majors and treasury yields had another mixed day.
Fed back in Focus for Investors
Another set of strong data prints last night has brought the Fed and its next rate move back into focus for investors despite the next meeting still being 35 days away. Last week’s CPI number was a slight miss, but most of the other data including Friday’s PPI and last nights Retail Sales have shown strong signs of a resilient economy, and which could lead to the risk of further hikes or rates remaining higher for longer. The FX market has been leading the way with the dollar on the charge against most of the majors for the last few weeks and US treasury yields have also remained bid, but some investors are now looking more closely at stock markets and valuations in the face of current conditions and feel there is a risk of harder downside corrections.
Central Banks in Focus Today
It was a huge day in terms of data releases yesterday and we have more on the horizon for investors today but central banks step into closer focus in the sessions ahead. First up in the APAC session we have the latest rate decision from the RBNZ with market expectation on them keeping the rate at 5.50%. Traders are expecting volatility in the Kiwi dollar around the event with the statement and press conference likely to be more impactful. The London session once again sees a key data release from the UK, this time we have the key CPI number due out. The US session has the release of the US Building permits data and Industrial Production numbers but the main event falls later in the day with the release of the FOMC Meeting Minutes.
