Stocks Tread Water Ahead of Inflation Data – Nasdaq up 0.2%
US markets moved through a relatively subdued session overnight, with investors maintaining their focus on the growing likelihood of Federal Reserve rate cuts despite a sharp fall in weekly unemployment claims. The data failed to dislodge expectations of policy easing, and equities ended mixed, with the Dow edging 0.07% lower to close at 47,850. The S&P 500 managed a modest 0.11% gain to finish at 6,857, while the Nasdaq added 0.22% to close at 23,505. The dollar pulled back some of its recent losses, the DXY rising 0.19% to 99.06. Treasury yields also pushed higher; the 2-year yield climbed 4 basis points to 3.523%, and the benchmark 10-year rose 3.5 basis points to 4.098%. In commodities, oil markets extended their upward trajectory as stalled Ukraine peace negotiations kept geopolitical tensions elevated. Brent rose 1.07% to $63.34, while WTI climbed 1.22% to $59.67. Gold traded quietly once again, holding near recent highs with a slight 0.06% lift to USD 4,208.60.
Dollar in Focus Today for Traders
The U.S. dollar edged up against a basket of currencies on Thursday but stayed close to the five-week low touched earlier in the session as investors braced for a Federal Reserve rate cut next week. Investors widely expect a rate cut when the Fed meets next week and will be watching for signals on the policy path ahead. Traders are pricing nearly a 90% chance of a quarter-point rate cut next week, and currency traders are looking to the potential that a surprise increase in tonight’s inflation data could rock the market. An on-expectation print will lock in a rate cut of 25 basis points, but anything higher than expected could see the market turn swiftly and see some big moves across the major pairs.
US Inflation Data in Focus Today
The early part of today’s macroeconomic calendar is expected to remain quiet, but attention will shift firmly to key US inflation indicators later in the session. There is very little on the cards in both the Asian session and the London session; however, things should get very lively once New York enters the fray. The initial focus will be on Canadian markets, with key employment data due out. Monthly numbers are expected to show a 1.5k decrease in jobs after last month’s strong 66k increase, with the unemployment rate expected to creep up to 7.0%. However, traders are expecting much more action later in the session when the delayed Core PCE data is released; this is the last print ahead of next week’s Fed meeting. The market is expecting the PCE number to show a 0.2% month-on-month increase, and anything off that print will see big moves in the market. University of Michigan Consumer Sentiment and Inflation Expectations numbers are out later in the day, but traders are expecting that the PCE number will dominate.
