Markets Drop Ahead of Mixed Week – Dow Down 0.4%
US Stocks dropped in trading yesterday as investors looked ahead to a mixed week of data, central bank talk, and holiday-influenced markets. The Dow lost 0.41%, the S&P 0.31%, and the Nasdaq finished 0.27% in the red as investors continue to weigh Fed rate options ahead of Friday’s key PCE data print. The dollar and US treasury yields had another ‘off’ day as the dollar lost ground on the majors, the Dxy dropping 0.2% and yields popped higher. The rate-sensitive 2-year gained 3.2 basis points and the benchmark 10-year added 3.7 basis points to close at 4.632% and 4.255% respectively. Oil jumped as the Russian government ordered output cuts, Brent gaining 1.55% to move up to $86.75 a barrel and WTI up 1.64% to $81.95 per barrel and Gold eased back higher in line with the weaker greenback, closing at the $2,174.50 level.
Markets Now Data Dependent Ahead of Next Fed Move
The last few days have shown some consolidation in US markets as investors continue to evaluate the message that we got from the Fed meeting last week. As always, we can interpret what was said, as there was no action, in two ways, and it appears that the market is doing that on a daily basis at the moment. On the positive side of things, we did have the Fed Chair indicate that we would have rate cuts this year and the dot plot had the market moving straight back to pricing in 3 cuts ahead, which saw fresh record highs for stocks again. However, on the negative side, we have to note that the dot plot is just representing members’ (some non-voting) projections at a certain point in time – and they can change their minds – therefore those 3 cuts are not guaranteed, and recent data is certainly not pointing in that direction. So, we are back to where we traditionally stand waiting for the next key data prints to point us in the right direction, and looming on the horizon is the Fed’s favorite inflation number, the PCE Price Index, due out on Friday as well as a host of other tier 1 numbers this week.
All Quiet Ahead of US Data Later Today
Asian markets are set to open marginally on the back foot this morning as Wall Street indices dropped off recent historic highs, and with little on the event calendar, traders are expecting to see bearish rangebound conditions ahead. The same can probably be said of the European session, although a wary eye will be kept on the newswires as tensions continue to increase in Russia. The New York session however does feature some fresh data updates out of the US which could stimulate some stronger moves. First up the latest Durable Goods data prints are due out, although these are likely to be superseded by the CB Consumer Confidence data later in the day when it is released, alongside the Richmond Manufacturing Index.
