US Stocks Fall After Powell Comments – Nasdaq down 1%
US stocks fell in trading yesterday, ending a three-day streak where they hit fresh highs repeatedly, as Fed Chair Jerome Powell advised that inflation concerns are on par with a falling labour market. The Dow lost 0.19% to 45,656, the S&P fell 0.55% to 6,656, but the Nasdaq took the brunt of the pain, losing 0.95% to move back down to 22,573. The dollar was relatively steady on the day, the DXY drifting 0.10% lower to 97.24, while Treasury yields also fell, the 2-year down 1.7 basis points to 3.586% and the 10-year down 4.1 basis points to 4.106%. Oil prices jumped as news hit the market that the deal to resume exports from Kurdish ports stalled, Brent up 1.92% to $67.85 and WTI up 2.17% to $63.63. Gold surged again in early trade to record yet another fresh all-time high just south of $3,800 before drifting lower, ultimately closing up 0.45% at $3,764.01 an ounce.
Correlations Falling Could Signal Corrections Ahead
Traditional correlations across some financial products have appeared to break down in recent weeks, and for some, over the course of the last several months. Narratives around moves from financial commentators are lacking consistency, with different products tending to write their own story recently. For instance, since the Fed meeting last week, we have seen the dollar and US yields push higher, supposedly on the back of a less dovish Fed outlook. However, US stock indices powered higher from all-time highs to yet more all-time highs on the back of more anticipated rate cuts from the Fed. We also have gold smashing new highs on haven buying, while the aforementioned stock markets are also hitting record levels. Usually, these situations don’t tend to last too long, and we see a correction in one of the products. The trick for traders will be picking the right one and timing when to jump on the trend reversal.
Quieter Trading Day Ahead for Investors
It’s a quieter calendar day ahead for traders, although given recent moves and updates, most market participants are expecting to see more volatility in the market as we progress through the sessions today. The big data event of the day will fall in the Asian session, with all eyes on the Australian market for the latest CPI release. The market is expecting to see a pickup in the year-on-year number to 2.9%, and anything off that print should see strong reactions in RBA rate move expectations and in the Aussie dollar. The European session sees the release of the latest German IFO Business Climate data, which could move the euro if it misses the expected 89.3 print, while the New York session has the monthly New Home Sales (exp. 650k) and the weekly US Crude Oil Inventory number (last -9.3mio) releases. However, overall, most traders are expecting updates on the newswires to hold greater sway.
