Markets Hit New Record Levels – Dow Up 0.6%
Financial markets reached new record highs again yesterday, buoyed by stronger-than-expected US data. The S&P 500 notched up another all-time high—its 42nd this year—closing at 5,745, having gained 0.40% on the day. The Dow and Nasdaq also climbed, rising 0.62% and 0.60% respectively. US Treasury yields continued their ascent, with the 2-year yield up 6.8 basis points to 3.621%, while the 10-year yield edged up by 0.8 basis points to close at 3.789%. The dollar pulled back once again, with the DXY index losing 0.42% to trade at 100.53.
Oil prices saw significant declines as OPEC+ confirmed plans for upcoming output increases. Brent crude dropped 2.53% to $71.60, while WTI fell 2.90% to close at $67.67 per barrel. In the precious metals market, silver mirrored gold’s rise and hit a new record high, while gold itself reached another new peak at $2,685.42 before closing 0.5% higher on the day at $2,670.52 per ounce.
Fed on Course for Another 50 Basis Point Cut – PCE Data Could Prove Pivotal
Financial markets are still pricing in further aggressive rate cuts from the Federal Reserve in the coming months. Following the accuracy of last week’s expectations, investors are now aligning their strategies accordingly. The market is currently anticipating an additional 74 basis points of cuts before the year’s end—24 points more than the Fed’s forecasted 50. Despite a shift in focus towards the job market, tonight’s inflation data could significantly influence these expectations.
Some market participants believe the current rate cut expectations may be overly optimistic. Should there be any indication that inflation could resurge, hopes for more substantial cuts may be dashed. The forecast for the headline figure is a 0.2% month-on-month increase, and any surprise, particularly to the upside, could trigger considerable market movements.
Another Lively Trading Day to Close Out the Week
Traders are gearing up for another eventful day to wrap up the trading week, as financial markets continue their upward momentum. The macroeconomic calendar is relatively busy today, offering several updates to keep traders engaged. Inflation data is in the spotlight, with Tokyo’s CPI data already meeting expectations with a 2.0% year-on-year increase early in the Asian session. Spanish flash CPI data is set to be released shortly after the European open.
However, the highlight of the day is expected to be the release of the Federal Reserve’s preferred inflation indicator, the Core PCE Price Index, early in the New York trading session. Canadian GDP data is due at the same time, though it is likely that US data will dominate market movements. Later in the day, the Revised University of Michigan Consumer Sentiment and Inflation Expectations figures are also due, setting the stage for the weekend and a well-deserved break for traders.
