US Markets Drop After Strong Data – Nasdaq Down 0.65%
US stocks fell in trading yesterday after a stronger-than-expected Producer Price Index (PPI) print increased expectations of a more hawkish tilt to next week’s anticipated rate cut from the Federal Reserve. The Dow dropped 0.53%, the S&P 500 fell 0.54%, and the Nasdaq lost 0.66% by the close of the session. Treasury yields rose following the data, with the 2-year yield adding 3.7 basis points to reach 4.190% and the 10-year yield gaining 5.7 basis points to climb to 4.328%. Oil prices closed near flat, with Brent crude dipping 0.19% to $73.36 and WTI down 0.38% at $70.02. Gold prices suffered a significant drop as profit-taking flows hit the market after reaching a five-week high, closing 1.37% lower at $2,680.86.
Dollar Remains Firm Ahead of Fed Cut
The dollar gained further ground over the past trading week, despite markets locking in expectations of a 25-basis-point cut from the Federal Reserve next week. The probability of the Fed reducing the base interest rate by 25 basis points now stands at 96%, although markets are not expecting a follow-up cut in the first meeting of 2025 as attention shifts towards the start of the Trump administration. The DXY is now 1.5% higher than its December low, and foreign exchange markets anticipate further strength in the greenback as the year-end approaches. With little on the economic calendar today, traders are expected to continue buying the dollar on any dips, a pattern likely to persist into the middle of next week when the Federal Reserve announces its decision.
Quiet Trading Day Expected to Close Out the Week
A calmer trading session is anticipated today, with little on the macroeconomic calendar to disrupt market flows. The Asian session is expected to open on a weaker footing following a poor day on Wall Street, and this sentiment is likely to carry over into the European session. UK markets may see some activity early in the London trading day with the release of the latest UK GDP data, where a modest 0.1% month-on-month increase is expected. In contrast, the US session has no significant events scheduled, and further profit-taking flows could emerge as investors look ahead to next week’s pivotal Federal Reserve meeting.
