Paul Walton
Nasdaq rallies on lower bond yields in see-saw markets
Markets rallied after sell-offs this week, led by Nasdaq. Bond markets steadied, with yields backing off highs. This reversed prior moves this week. After focusing on the Fed and interest rates this week, traders are starting to think about the impact of a Government shutdown next week and an escalating Auto workers strike. Commodities saw buying in oil, as did precious metals and the ag complex. Bottom-line: risk-on.
Problems with the Magnificent Seven Stocks
Vincent Deluard, StoneX global macro strategist, asks: are we at an inflexion point, when higher bond yields and a steeper yield curve could hit the rating of expensive growth stocks? The Magnificent Seven (Mag7) stocks have become synonymous with this bull market: Amazon, Alphabet, Apple, Nvidia, Meta, Microsoft and Tesla. These stocks make up a quarter of the S&P 500 market value.
Nasdaq tumbles on higher bond yields
Nasdaq continued to lead markets down this morning as traders digested a pessimistic assessment of the Fed’s statement yesterday. Jobs data continues to demonstrate that the economy is not slowing. 10-year bond yields spiked to almost 4.5%, rates last seen in 2006, and putting a strain on the valuation of equity markets. Bottom-line: risk-off.
Fed pauses rates, but Nasdaq fell on fears that interest rates will still rise
Nasdaq fell sharply on news that while the Fed will pause rates for now, higher rates are possible. Higher bond yields and the risk of another rate hike this year caused a sell-off in equities and bonds. Oil saw profit-taking. The dollar index rallied on hopes that US rates will rise further. Bottom-line: risk-off.
Oil prices flirt with $100 handle
WTI crude has risen to $91.65 per barrel (bbl) at time of writing, with a $93.44 high Brent crude oil has risen to $94.58 per barrel (bbl) at time of writing, with a $95.66 high The US dollar index has risen to 105.2 with strong momentum
Bitcoin leadership and record high bond yields ahead of Fed’s rate decision
Nasdaq, the R&P 500 and Russell 2000 equity indices were off marginally as markets braced for tomorrow’s Fed interest rate decision. Bitcoin rose 1.2% to $27,177, continuing a recent rally. Ten year bond yields rose to 4.37%, a rate last seen in June 2008. Oil and the dollar, recently strong markets, were unchanged, as were Gold and Silver. Bottom-line: risk-off.
USDBRL should reflect interest rate decisions in Brazil, the United States, England and Japan
Bullish factors The Federal Reserve is expected to take a firm stance against inflation and release its projections of interest rates higher than the median of market estimates, reinforcing the perception that interest rates will stay higher for longer in the US and strengthening the dollar. The Monetary Policy Committee should reduce the basic interest rate (Selic) by 0.50 p.p., reducing the country's interest differential to other economies and reducing the inflow of investments into the country, weakening the BRL. Bearish factors The Bank of England is expected to raise interest rates even in the face of economic stagnation in the country, increasing concerns about an economic slowdown in Europe and strengthening the dollar. The Bank of Japan is expected to maintain its ultra-loose monetary policy unchanged, contributing to the strengthening of the dollar by contrast.
S&P 500 stalled ahead of Fed meeting, Oil price hits 2-year high
Higher oil prices continue to be the headline in financial markets, hitting 2-year highs and briefly surpassing $92 per barrel. Nasdaq and the S&P 500 struggled to find direction ahead of the Federal Open Market Committee September meeting today and tomorrow. No one expects another rate hike. Treasury markets saw yields rising, with 10-year yields close to their highest levels in 16 years at 4.32%. The US dollar index paused after a recent run. Bottom-line: risk-hold.
Gold remains range-bound
In the short-term gold remains range-bound, and after finding support in mid-July on its dip below $1,900 (some of which was believed to be institutional and some from the official sector), has traded between $1,900 and $1,950. For the time being we can probably expect it to stay in that range as there is plenty of resistance on the charts above $1,950 and the professional markets, at least, are not prepared to commit themselves until the Fed’s and European Central Bank’s interest rate policies become crystallised.
China showing signs of recovery, Yuan rallies
Global attention is focused on Chinese economic data and financial market conditions after weakness in the first half of the year, with a troubled property sector, and official action to cautiously lower interest rates and increase domestic bank liquidity. Generally, the flow of economic data was more positive than expected last week with signs of economic momentum gathering –better-than-expected retail sales, stronger loan demand and signs that inflation is rising. The Central Bank is still fine-tuning monetary policy to promote that growth and offset property-sector weakness while trying to avoid a sharp sell-off in the Yuan, and last week showed some signs that this is working.
Nasdaq leads equity drop, oil and dollar remain strong
Major indexes extended losses after mid-day, dragged down by tech majors in Nasdaq. Oil and the US dollar built on recent gains, with the former rising to $90.7 per barrel and the latter holding the 105.3 dollar index level. US consumer sentiment is finally eroding, signaling the lagged impact of higher rates. On the other hand, China’s retail data was surprisingly strong, prompting a rally in the yuan. US manufacturing data was surprisingly strong. Bottom-line: risk-off.