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Wealth Daily 13 June 2022

WEALTH DAILY 2022-06-13
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US equities sank of Fri, after the release of worse than expected US inflation data. The Dow Jones Industrial Average lost 880 pts or 2.73% to close at 31392.79. The S&P 500 index fell 2.91%. The tech-heavy Nasdaq Composite retreated 3.52%. The small cap Russell 2000 lost 2.73%. 

Megacap tech stocks fell on Fri, including Apple (AAPL US, -2.94%), Microsoft (MSFT US, -3.54%) Amazon (AMZN US, -4.69%), Alphabet (GOOGL US, - 2.27%), Nvidia (NVDA US, -5.04%), and Meta Platforms (META US, -3.66%). 

Early trade in US equity index futures are pointing to a lower opening when Wall Street opens for regular trade later today. Futures tied to the Dow Jones Industrial Average have dropped about 360 points. 

On Fri, the US Bureau of Labor Statistics reported that its consumer price index (CPI) increased 8.6% from a year ago more than estimates of 8.3%. The core CPI, which excludes food and energy prices, was up 6%, slightly higher than the 5.9% estimate. 

The yield of the two-year US Treasury note skyrocket. The yield on the 2-year rose 25.19 basis points to 3.0632%. The 2-year is very sensitive to the Federal Reserve’s plans for short-term interest rates. Fixed income traders believe the Fed is going to have to speed up their plans for rate hikes. 

The yield on the 10-year Treasury note notched up 11.37 basis points (bps) to 3.1555%. The spread between the 2-year and 10-year is again very narrow. 

Junk bonds took a hit. The iShares iBoxx High Yield Corporate Bond ETF (HYG US) fell 1.70%. The average yield-to-maturity in the HYG ETF is now 7.23%. 

The front-month Brent and WTI futures closed down $1.06 at US$122.01/bbl and $0.84 at US$120.67/bbl respectively. 

The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, rose 0.90% to 104.148. 

Despite the strong US dollar, precious metal prices rose. The most actively traded US gold futures (Jun) contracts settled up $22.70, or 1.23%, at US$1,875.50/oz. July silver, which is the most actively traded silver futures, rose 11.6 cents, or 0.53%, to end at US$21.913/oz. Investors may believe that it will take a while for the Fed to get inflation under control. 

European equity markets finished lower on Fri. The UK FTSE lost 2.12%, France's CAC 40 fell 2.69%, while the German DAX retreated 3.08%. 

Credit Suisse (CSGN SW) closed down 5.7% after State Street (STT US, -4.3%) dismissed rumours that it is considering a takeover of the embattled Swiss lender.