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Wealth Daily 14 July 2022

WEALTH DAILY 2022-07-14
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Data released Wed showed super hot US inflation in Jun. The annual rate of inflation as measured by the Consumer Price Index (CPI) surged to 9.1%, up from 8.6% in May. Month on month, prices spiked 1.3% from May to Jun. The hot CPI report, as well as robust job gains in Jun, is putting pressure on the US Federal Reserve to front-load the path of rate hikes. 

North of the border, the Bank of Canada raised its policy rate by 100 basis points (bps) on Wed. That fueled speculation the Fed would soon do the same. Fed-funds futures now show 67% chance of a 100 bps hike in Jul.  However, US Treasury markets indicate that although the rate hikes may come faster, the Fed will not take rates much higher than previously thought. The 10- year Treasury yield reversed an early climb on Wed, and slipped 3.51 bps to 2.9336%. 

Meanwhile, the 2-year Treasury yield rose 10.56 bps to 3.1547%, resulting in the two-to-10-year yield curve inversion deepening to as much as 22 bps. That’s a level that points to the US as already being in a recession, according to Wall Street pundits. 

The US equity market slid on Wed, but not badly. The Dow Jones Industrial Average lost 208.54 pts or 0.67% to close at 30,772.79. The broader S&P 500 index fell 0.45%. The tech-heavy Nasdaq Composite retreated 0.15%. The small cap Russell 2000 dropped 0.12%. 

Megacap tech stocks closed mixed on Wed. Gainers include Amazon (AMZN US, +1.08%), NVidia (NVDA US, +0.54%), and Meta Platforms (META US, +0.13%), while decliners include Apple (AAPL US, -0.25%), Microsoft (MSFT US, -0.37%) and Alphabet (GOOGL US, -2.34%) 

Later today (Thur) JPMorgan (JPM US, -0.94%) and Morgan Stanley (MS US, - 1.26%) report earnings.  The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, fell 0.11% to 107.957 on Wed.

Again, the euro briefly traded below parity.  The most actively traded US gold futures (Aug) contracts settled up $10.70, or 0.6%, at US$1,735.50/oz.

September silver, which is the most actively traded silver futures, rose 23.6 cents, or 1.2%, to end at US$19.194/oz.  European equity markets finished lower on Wed.

The UK FTSE lost 0.74%, France's CAC 40 fell 0.73%, while the German DAX retreated 1.16%.