- The S&P 500, the Nasdaq 100, and the Dow Jones remain positive.
- Softer than expected, US CPI data augmented speculations that the Fed will be less aggressive.
- Traders expect the Federal Reserve to hike to 5% and cut rates ahead of Q4 2023.
US stocks remained volatile after the release of inflation data in the United States (US) and remain positive off the day's highs, with the S&P 500, the Nasdaq 100, and the Dow Joines Industrial Average, each gaining 0.98%, 1.33%, and 0.47%. At the time of writing, the S&P 500 sits around 4,026.90.
It should be said that the indices, albeit remaining positive, are trading well below the day’s highs, as shown by Tuesday’s price action, forming a vast “inverted hammer” candlestick. Some traders speculate that is the reflection of profit-taking ahead of Wednesday’s Federal Reserve monetary policy meeting.
Before Wall Street opened, the US Department of Labor revealed that November’s Consumer Price Index (CPI) rose less than the 7.3% YoY expected to 7.1%. The so-called core CPI for the same period, which excludes volatile items like food and energy, printed 6.0% vs. 6.3% estimates. The reaction on the data sent the S&P 500 rallying to fresh three-month highs.
Money market futures seem to indicate an upcoming rise in the Federal Funds rate, making it peak at 5%. Eurodollar futures portrayed traders speculating that the Federal Reserve would make its first rate cut of around 20 bps by September 2023. Meanwhile, the US Dollar Index appeared volatile as it fell to six-month lows near 103.586, although recovering shortly afterward and now resting comfortably at 103.987.
Elsewhere, US Treasury bond yields, namely the 10-year benchmark note rate, plunged 15 bps, from around 3.630% to 3.459%, though of late, recovered some ground, sitting around 3.514%.
Analysts at TD Securities said, “the November CPI report does not affect the expectation of a 50bp rate increase at tomorrow’s FOMC meeting. Additionally, given the strength in core services inflation, it is clear the Fed will need to remain in a tightening mode beyond the December meeting. We will be looking for any Fed communication tomorrow regarding a further downshift in the hiking pace for the February meeting.”
What to watch
Ahead of the week, the US economic docket will feature the Federal Reserve Open Market Committee (FOMC), where the Fed is expected to hike rates by 50 bps the Federal Funds rate (FFR). Additionally, the Summary of Economic Projections (SEP) would be released, and the dot-plot would portray the Fed officials’ expectations for interest rates.
S&P 500 Daily Chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops toward 1.0650 ahead of German inflation data
EUR/USD is falling toward 1.0650 in European trading. Dismal China's Manufacturing PMI and pre-US debt deal vote anxiety support the safe-haven US Dollar while markets pare ECB rate hike bets after softer French inflation data. German inflation data, Fedspeak and US House vote eyed.
GBP/USD extends losses toward 1.2350 amid firmer US Dollar
GBP/USD is extending losses toward 1.2350 in the European session. Markets stay jittery amid China growth worries and ahead of the US House vote on the debt deal. Hawkish Fed's Mester underpins the ongoing US Dollar upsurge. More Fedspeak in focus.
Gold price rebound eyes $1,990 and US factors
Gold Price picks up bids to refresh intraday high as buyers cheer a two-day winning streak, after refreshing the lowest levels in 10 weeks. In doing so, the XAU/USD fails to justify the latest rebound in the DXY but aptly cheers the downbeat Treasury bond yields.
BTC bulls recovery plan targets $30,000 as bears exhaust
Bitcoin action slows down, allowing bears to doubt their strength. As more time elapses, the chances of bulls taking over control of BTC become more likely. A spillover effect would be noticeable in Ethereum and Ripple prices.
Risk off flow into month end
We had warned against the market wanting to get overly excited about the news of a US debt ceiling deal that was always going to get done. And now that this reality is coming to fruition, it’s back to focusing on the market drivers where investors need to focus.