Stocks Hit Record Levels After US Data – Dow up 1.36%
All three of the major US stock indices posted record closes in trading yesterday as inflation and jobs data pointed to more Fed rate cuts in the coming months. The CPI data actually came in slightly higher than expected; however, weekly unemployment claims hit their highest level in nearly four years. The Dow led the way higher, closing up 1.36% at 46,108, followed by the S&P, which added 0.85% to 6,587, and the Nasdaq, which gained 0.72% to 22,043. Treasury yields eased lower after the data, the 2-year down 0.3 of a basis point to 3.541% and the 1-year down 2.3 basis points to 4.022%. The dollar pulled back further against the majors, aided by a stronger euro, which rose after the ECB held interest rates steady. The DXY was down 0.27% to 97.51. Oil prices took a hit as traders factored in anticipated lower demand from the US amid increasing supply, with Brent down 1.75% to $66.31 and WTI down 2.14% to $62.30. Gold had a relatively quiet day, trading in a tight range near recent record levels, down 0.18% to $3,633.47 an ounce.
Dollar Under Pressure After US Data
The dollar remains under pressure across the board after US unemployment claims data hit a near four-year high yesterday. Inflation data came in slightly higher than expected, which helped to temper any big sell-offs, but the dollar index is now trading near monthly lows. More weaker data in the coming weeks could push the dollar towards annual lows; however, there is some hope on the horizon for dollar bulls. Much of yesterday’s drop in the index can be attributed to the euro (which makes up 57% of the index), which pushed higher after the ECB kept rates on hold. Also, some traders feel that with the market now pricing in a 79% chance (up from 45% just a week ago) of 75 basis points of rate cuts by the Fed by the end of the year, there is some room for a correction in those estimates. This could see the dollar start to gain back some of its recent lost ground. Much will depend on US numbers in the coming weeks, but for now we can lock in a 25-basis-point cut from the Fed next week.
Quieter Calendar Day into the Weekend
It is a much quieter calendar day for traders today as they ease themselves into the weekend. However, as always, there is the chance of some market turbulence in the coming sessions, with geopolitical updates still likely and some key data still to come. The Asian session has very little on the calendar, but markets are expected to start the day on the front foot after a record day on Wall Street. The European session will see a strong focus on UK markets, with a big data drop due early in the day. The GDP number (exp. 0.0% m/m) should have the most impact, and traders are expecting to see moves in sterling around the release. The US session sees the Preliminary University of Michigan Consumer Sentiment (exp. 58.2) and Inflation Expectations (last 4.8%) data released early in the day, but traders are expecting a quieter end to this week than the previous one—unless we see some big updates on the newswires.
