January 28, 2023

US Stocks Start Fed Week Higher As CPI Data Looms: Markets Wrapping

US Stocks Start Fed Week Higher As CPI Data Looms: Markets Wrapping

(Bloomberg) – US stocks rose as investors prepared for Tuesday’s reading of consumer prices. US Treasurys closed lower on Monday, erasing previous gains.

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The S&P 500 rose 1.4%, marking its best session in nearly two weeks. The tech-heavy Nasdaq 100 also gained more than 1%. Treasury yields rose, with the 10-year rate around 3.61%. Advance dollar.

All eyes will be on the US CPI reading on Tuesday, which is expected to show prices, while still elevated, slowing. The S&P 500 could — in a best-case scenario — rise as much as 10% on a softer CPI reading, according to JPMorgan Chase & Co.’s sales and trading desk. However, the chances of this happening are about 5%, according to their analyses. A cooler inflation reading from the previous month spurred a daily rise of 5.5%, as the index posted its best day after the CPI on record.

A weak CPI reading would justify the Fed’s expected half-point move on Wednesday and shed light on whether markets can anticipate rate cuts in late 2023. While central bank officials signaled a downward shift in the pace of rate hikes They also emphasized that borrowing costs should remain constrained for some time.

“I’m not going to read anything about the move today. The move will be after CPI one way or another,” said John McClain, portfolio manager at Brandywine Global. “People are sucked into a false sense of security on a soft landing. The Fed isn’t cutting any time soon. This will just be a longer cycle compared to 2020.”

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After the Fed, the European Central Bank will announce its interest rate decision on Thursday, and may also choose to raise half a point. The markets will also face decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.

Main events this week:

  • US Consumer Price Index, Tuesday

  • FOMC Interest Rate Decision and Fed Chair’s Press Conference, Wednesday

  • Chinese medium-term lending, real estate investment, retail sales, industrial production, unemployment surveyed, Thursday

  • ECB interest rate decision and ECB President Lagarde’s briefing, Thursday

  • Rate decisions for the Bank of England, Mexico, Norway, the Philippines, Switzerland and Taiwan on Thursday

  • Investing Across US Borders, Business Inventory, Manufacturing Empire, Retail Sales, Initial Jobless Claims, Industrial Production, Thursday

  • Eurozone S&P PMI, CPI, Friday

Some of the major movements in the markets:

Stores

  • The S&P 500 is up 1.4% as of 4:01 p.m. New York time.

  • The Nasdaq 100 rose 1.2%.

  • The Dow Jones Industrial Average rose 1.6%.

  • MSCI World Index fell 0.1%

currencies

  • The Bloomberg Spot Dollar Index rose 0.2%.

  • The euro was little changed at $1.0535

  • The British pound was little changed at $1.2271

  • The Japanese yen fell 0.9 percent to 137.73 per dollar

Digital currencies

  • Bitcoin changed little at $17,130.18

  • Ether rose 0.2% to $1,267.06

bonds

  • The yield on the 10-year Treasury note advanced three basis points to 3.61%.

  • Germany’s 10-year yield was little changed at 1.94%.

  • The yield on the 10-year UK Bund advanced 2 basis points, to 3.20%.

goods

  • West Texas Intermediate crude rose 3.4 percent to $73.41 a barrel

  • Gold futures fell 1.1 percent to $1,791.40 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Srinivasan Sivapalan.

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