Wall Street muted on mixed inflation messages

The Dow Jones Industrial Average rises just 0.09% on Monday August 8, while the S&P 500 loses 0.12% and the Nasdaq Composite drops 0.1%

Stocks on Wall Street were mostly flat on Monday August 8, the dollar weakened and US government bond yields fell as investors weighed mixed messages about inflation and how much the Reserve federal government could be aggressive in fighting it.

The Dow Jones Industrial Average rose just 0.09% on the day, while the S&P 500 lost 0.12% and the Nasdaq Composite fell 0.1%.

It should be noted that Nvidia, whose shares fell about 6% after the chip designer warned on Monday that its second quarter revenue would fall 19% from the previous quarter due to weakness in its games.

The broader Euro STOXX 600 ended up around 0.75% on Monday, led by cyclical and growth stocks, helping it recoup its losses from Friday August 5th. But the MSCI World Stock Index, which tracks stocks from 47 countries, added just 0.15%.

“With the strength of the labor market, the threat of a recession seems remote, but concerns about the aggressiveness of the Federal Reserve hang over the market,” said Quincy Krosby, chief global strategist for LPL Financial, in an email.

Indeed, the rise in interest rates remained at the center of investors’ concerns.

Surprisingly strong US employment data last week raised the stakes for the July US consumer price report, due Wednesday August 10, which could see further acceleration in the inflation – and more aggressive interest rate hikes from the Federal Reserve.

Business investment appears to have been one of the first victims of rising prices and rates, according to new data from the US government.

Meanwhile, U.S. consumer expectations for inflation one year and three years ahead fell sharply in July, a New York Federal Reserve survey showed on Monday, a victory for policymakers .

On Monday, yields on the benchmark 10-year note fell to 2.751%, after hitting 2.869% on Friday, the highest since July 22. Two-year yields were last at 3.211%, after hitting 3.331% on Friday, the highest since June 16.

“The Other Side of That Mountain”

“Rising inflation and the Fed’s reaction to it have been a real headwind for valuations this year,” Morgan Stanley strategists wrote in a note on Monday. “However, it has also been a tailwind for earnings. Now we are on the other side of that mountain, and the operating leverage is probably sticking out more than the consensus expects.

Fed funds futures traders are now pricing in a 67.5% chance of another 75 basis point rate hike in September, and of the fed funds rate rising to 3.65% in September. here March, compared to 2.33% currently.

“We see inflation remaining above the Fed’s 2% target through next year,” strategists at the BlackRock Investment Institute wrote in a note on Monday. “We think the Fed will continue to heed calls to get inflation under control until it recognizes that doing so will dampen growth.”

In the currency markets, the US dollar fell around 0.2% against a basket of six major currencies at 106.4, giving up some gains after strengthening on the jobs boom and rising prices. yields.

Analysts remained bullish on the outlook for the US currency.

“Data like this will fuel any thinking about ‘US exceptionalism’ and is very positive for the USD against all currencies,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, making reference to employment statistics in the United States.

The euro fell slightly to $1.019.

Bitcoin and other cryptocurrencies, which tend to serve as a barometer of risk appetite, gained. Bitcoin last rose 3.25% to $23,942.

Gold broke higher on Monday as the dollar and Treasury yields retreated. Spot gold rose 0.8% to $1,788 an ounce, after falling 1% in the previous session. US gold futures rose 0.76% to $1,786.

Oil prices rebounded a bit on Monday but were still near their lowest levels in months in volatile trading as positive economic data from China and the United States boosted hopes for growth in demand despite recession fears.

U.S. crude recently rose 1.79% to $90.59 a barrel and Brent to $96.40, up 1.59% on the day. – Rappler.com

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