Stock Markets Higher – Nasdaq up 1.5%
US Stock markets surged higher again yesterday on optimism that the Fed will end its tightening cycle this week. All major US indices enjoyed strong days, the Dow up 0.53%, the S&P up 0.93% and the Nasdaq once again leading the way, closing 1.53% higher, helped by Apple Inc hitting an all-time high. The S&P and Nasdaq both hit levels not seen since April 2022. Other markets were much more subdued with both treasuries and FX trading in familiar ranges ahead of tomorrow’s inflation numbers and the FOMC on Wednesday. Oil was another stand out with WTI dropping over 4% after a Goldman report came out with a significantly lower prediction for Oil prices over the next few months as supply looks set to outstrip demand despite production cuts.
Data and Fed in Focus
Investors are expecting relatively quiet trading conditions today ahead of key inflation data tonight in the US. The CPI number is expected to show a slowing rise in inflation, down from 4.9% y/y in April to 4.1% in May with the monthly increase expected at 0.2%, down from 0.4%. Given the strong move in US equity markets overnight, traders are rightly concerned that the bigger risk trade now sits with a topside surprise in these numbers tonight which could dramatically affect Fed thinking. The market is now pricing in a 77% chance of no rate change from the FOMC on Wednesday but if tonight’s data shows that inflation is alive and kicking in the states then expect those odds to decrease significantly.
CPI Ahead for Traders Today
Investors are fully focused on the Federal Reserves latest rate update this week but for today’s sessions, we have the small matter of the CPI data to overcome before the anticipated pause is confirmed. It is not the only data out today and with little on the calendar in the Asian session, the first potentially market-moving data is due out of the UK early in the London day. Job numbers are due out with the Claimant count expected to show an additional 21k claims for May and the unemployment rate is set to increase to 4%. The focus will then swiftly move to the US and the aforementioned CPI data – the expectation is for a m/m increase of 0.2% with the y/y number dropping to 4.1%.
