Dow Hits 40K But Markets Pull Back
US Stock markets took another step higher yesterday with the Dow Jones notably topping the key 40,000 level before all the major indices ultimately closed lower. The Dow finished the day down 0.1%, the S&P was off 0.21% and the Nasdaq dropped 0.26%. US treasury yields gained back some of their post-CPI lost ground, the 2-year pushing 6 basis points higher to 4.793% and the benchmark 10-year finished up 2 basis points on the day at 4.377%. The dollar also pulled back some of its previous day’s losses with the Dxy up 0.27%, once again the Yen was the standout mover, UsdJpy up over 1% from its lows by the end of the day. Oil gained on the day, Brent up 0.6% to $83.27 per barrel and WTI up 0.8% to $79.23 per barrel whilst Gold fell off from its monthly highs to sit back around $2,380 per ounce by the NY close.
Has the Market Jumped Too Far Ahead of the Fed
Markets had a bit of a breather yesterday after another surge higher on Wednesday following CPI data showing slowing inflation in the US, but some investors are now pausing to consider if too much good news is priced into current levels. Markets reacted strongly to what was really a slight improvement in the CPI number and comments from Fed members overnight could point to the market having jumped the gun a touch. Thomas Barkin advised that inflation is still not where it needs to be and Loretta Mester added that reaching the Fed’s target will take longer than she previously thought. These are not the words of overly dovish members and even though there is a lot of water to come under the bridge from now to the price in September cut, if further data, and guidance from the Fed do not support this narrative, then we could be in for a volatile few months ahead.
Smoother Trading Conditions into the Weekend
Asian markets are set to open on the front foot again on the last trading day of the week as despite Wall Street drifting off its recent highs, most indices are still trading at elevated levels. Traders are anticipating smoother conditions on Friday with only a couple of key data releases scheduled. The APAC market will be focused on China midway through the session as we receive a bit of a data dump out of the world’s second-biggest economy, Industrial Production, and Retails Sales numbers the main releases that could move markets. There is little scheduled across the next two major trading sessions, although there are a couple of Fed members, Waller and Kugler set to speak in the US afternoon which could spike volatility as we head into the weekend.
