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%.