Wall Street is trying to bounce back from Tuesday's plunge, which was triggered by higher-than-expected US inflation data that makes the outlook for rate cuts increasingly uncertain. We are still seeing investors buying yesterday's drop. The S&P 500 is trading 0.5% higher pre-market.
US Treasury yields rose sharply yesterday, but are showing signs of stabilizing – at a high level: yields on the 10-year US bond remain at 4.3%.
Yesterday's CPI data from the US can only be described as a major disappointment as the outlook for disinflation is now uncertain. The strong US economy, including a very robust labor market, has kept inflation at a high level. Investors are still quite optimistic overall and hope that the rally that began in January 2023 can continue. From a fundamental perspective, however, interest rate cuts must now be reassessed – even additional rate hikes could be possible if inflation remains elevated in the coming readings.
Inflation in the UK, unlike the US, has been colder than expectations, raising hopes that the Bank of England will soon see conditions that would allow a rate cuts. Rapid disinflation in the UK is likely to put additional pressure on the GBP in the coming sessions. The USD remains in demand overall after rising to a high of 2024 yesterday. Much will now depend on US Treasury yields – we currently see them almost unchanged, but if they continue to rise, we will see more pressure on equities and gold as well as additional gains for the USD.
US inflation data has not been given an additional boost by the recent rise in oil prices – on the contrary, a look at the Bureau Labor Statistics report shows that energy prices fell significantly in January. As oil prices are now recovering after the sharp drop in the fourth quarter, inflation could be additionally driven by higher oil, fuel and transportation costs. Gold remains under pressure after yesterday's sharp rise in yields. We currently see the gold price hovering around the $1,990 mark.
👁 ROB'S MARKET OVERVIEW:
February 14, 2024
🌐/🇺🇸 Global/US Markets ↗️/➡️/↘️ (we expect some profit taking to return – it will in particular depend on yields – as they rise further, pressure on equities will increase)
Cyclical Stocks ↗️/➡️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ↗️/➡️
Defensive Stocks ↗️/➡️
Energy Stocks ↗️/➡️
Materials Stocks ↗️/➡️
💱 Forex
AUD, EUR, CAD ↗️/➡️
JPY ➡️
USD ↘️/➡️/↗️ (remains in demand; mostly flat for today after strong gains yesterday)
CHF ➡️/↘️
⚒ Commodity Markets ↗️/➡️
Oil prices ↗️/➡️
Natural Gas prices ↘️
Metal prices ↗️/➡️
Gold ➡️/↘️ (hovering at $1,990, more headwinds medium-term given outlook for rate cuts uncertain & higher yields)
⚡️Cryptos ↗️/➡️ (good performance during Asian/European trading; Bitcoin remains bullish, limited gains during US trading today)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
