US Stocks Hit Fresh Highs Again – Dow up 1%
US stock indices again rose in trading yesterday to hit fresh record levels as markets priced in a stronger easing cycle from the Fed. The Dow gained 1.04% to 44,922, while the S&P and Nasdaq both hit new closing highs, up 0.32% to 6,466 and up 0.14% to 21,713, respectively. Treasury yields took a hit after Scott Bessent called for rates to be at least 150 points lower, with the 2-year down 5.7 basis points to 3.674% and the 10-year down 5.6 basis points to 4.233%. The dollar continued to fall against the majors, with the DXY down 0.31% to 97.80. Oil prices also dropped to two-month lows as traders continued to price in diminishing demand, with Brent off 0.57% to $65.73 and WTI down 0.71% to $62.72. Gold prices edged higher on the back of the weaker dollar, up 0.23% to $3,354.92 an ounce.
Inflation Data Again in Focus for US Markets
The market is now nearly fully pricing in a 25-basis point cut from the Federal Reserve Bank in September after a largely on-expectations CPI print on Tuesday. Treasury Secretary Scott Bessent piled more pressure on the FOMC last night when he advised that he felt the base rate should be 150–175 basis points lower and called for a 50-basis point cut next month. Stock markets rallied to fresh highs again. However, some investors are concerned that the market is getting ahead of itself and that initial concerns that inflation may spike on tariff impact are still valid, and we may see them eventuate further down the track. Tonight’s PPI (Producer Price Index) may give an interesting indication of inflation expectations moving forward and could be seen by some investors as a better (more reasoned) indicator than Tuesday’s CPI (Consumer Price Index). The risk probably sits with a higher print than expected, which could see some sharp repricing, whereas an on-expectations or lower print will likely see a continuation of current trends.
Busier Calendar Day Ahead for Traders
It looks like being a busy day ahead for traders today, with updates from US markets flowing through to major data releases across all three trading sessions. Australian markets are again in focus early in the Asian session with key employment data due out. Traders will be looking closely to assess whether the Employment Change (exp. +25.3K) and Unemployment Rate (exp. 4.2%) updates will back up Tuesday’s RBA rate cut. The London session will see the focus again on UK markets early in the day, with key GDP data (exp. +0.2% m/m) due out alongside a raft of tier 2 numbers. We have the second major US inflation data drop of the week due out shortly after the New York open, with the key PPI (exp. +0.2% m/m) and Core PPI (exp. +0.2% m/m) numbers due out alongside the Weekly Unemployment Claims data (exp. +225K), with traders again expecting plenty of volatility around the releases. We could see further moves later in the day with Fed members Musalem and Barkin set to speak; however, their comments are likely to be overshadowed by an update from President Trump, scheduled to speak midway through the day.
