As trading commenced today, stocks on Wall Street dipped, accompanied by a sharp rise in Treasury yields in response to the latest inflation report, which revealed consumer prices remained hotter than anticipated last month. This development leaves the Federal Reserve with less room to maneuver in granting the interest rate cuts desired by the markets. The S&P 500 saw a 1.2% decline in the initial minutes of trading on Wednesday, with the Dow Jones Industrial Average dropping by 481 points, and the Nasdaq composite slipping by 1.2%. Concurrently, the yield on the two-year Treasury note, which typically mirrors expectations for future Fed actions, surged to 4.93%. Thursday is slated for the government to release figures on wholesale inflation.
Earlier on Wednesday, Wall Street had seen an upward trend, anticipating the government’s update on U.S. inflation, a factor that could influence the Federal Reserve’s forthcoming interest rate decision. Futures for the S&P 500 and the Dow Jones Industrial Average each exhibited a 0.2% increase prior to the market opening.
This week, investor focus remains on the latest consumer inflation data, alongside another report on wholesale prices. Additionally, attention is drawn to earnings reports from major U.S. banks.
Delta Air Lines experienced a 4.1% surge in its shares after announcing record revenue for the first quarter, coupled with $37 million in profits. This performance uplifted the entire airline sector, with United and American Airlines witnessing respective rises of 3.6% and 2.9%.
Meanwhile, the Honest Company, led by Jessica Alba, disclosed her resignation as chief creative officer. Despite posting its first profit since 2021 late Wednesday, the company’s shares experienced a modest decline before the opening bell.
A prevailing concern on Wall Street revolves around whether inflationary pressures will ease sufficiently to prompt the Federal Reserve to implement the interest rate cuts eagerly awaited by traders. Stephen Innes of SPI Asset Management expressed investor apprehension regarding the possibility of inflation figures surpassing expectations.
Recent economic reports have sparked doubts, leading traders to revise down expectations for interest rate cuts this year. Forecasts now hover around two or three cuts, with some even contemplating the possibility of no cuts. This contrasts sharply with initial projections at the year’s outset, which suggested six or seven cuts, according to data from CME Group. With the Fed’s primary interest rate currently at its highest level in over two decades, there’s a looming risk that prolonged high rates may precipitate a recession.
In European trading, Germany’s DAX and London’s FTSE 100 each advanced by 0.8%, while Paris’ CAC 40 gained 0.6%. In Asian markets, Hong Kong’s Hang Seng climbed 1.9%, whereas the Shanghai Composite index dipped by 0.7% following Fitch Ratings’ downward revision of China’s public finance outlook, citing increased risks stemming from the country’s efforts to reduce dependence on its beleaguered property sector and address rising public debt.
Tokyo’s Nikkei 225 retreated by 0.5%, while Sydney’s S&P/ASX 200 saw a 0.3% gain. India’s Sensex and Bangkok’s SET surged by 0.4% and 0.7%, respectively. South Korean markets remained closed for an election.
In early trading, U.S. benchmark crude oil gained 50 cents, reaching $85.73 per barrel on the New York Mercantile Exchange. Brent crude, the international standard, rose by 53 cents to $89.95 per barrel. Despite concerns over oil price hikes contributing to inflation, analysts suggest that for a significant impact on core inflation, oil prices would need to rise substantially beyond current levels.
In currency markets, the U.S. dollar slightly strengthened against the Japanese yen and the euro. On Tuesday, the S&P 500 posted a marginal gain, while the Dow Jones slipped slightly, and the Nasdaq composite registered a modest rise.
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