New York Stock Exchange

Caution dominated the first day of the week’s trading on Wall Street, as markets await inflation data that will be key to determining the timing and scope of interest rate cuts by the Federal Reserve.

Less than 24 hours before the CPI release, the S&P 500 struggled to gain momentum, approaching 5,050, while the Nasdaq 100 underperformed due to losses in Microsoft shares. And “Tesla” and “Apple”. Yields on 10-year Treasury bonds also changed slightly to record 4.17%, at a time when the cryptocurrency “Bitcoin” hovered near $50,000, for the first time since 2021, according to what was reported by “Bloomberg”.

Bloomberg reported that while the data is expected to confirm a further slowdown in inflation rates in the United States, traders remain unwilling to commit to large bets. This sentiment also prevailed after five consecutive weeks of gains that pushed stocks above overbought levels, sparking at least some calls for consolidation.

Inflation levels

The annual consumer price index is expected to fall to 2.9% in January from 3.4% the previous month, according to estimates of economists surveyed by Bloomberg. This will be the first reading below 3% since March 2021.

The agency quoted a survey conducted by 22V Research that 51% of investors surveyed believe that the market’s reaction to Tuesday’s consumer price index will be “risk-taking,” while only 19% chose “risk-off.”

A survey conducted by the Federal Reserve Bank of New York on Monday also showed that American consumers’ expectations for inflation in the medium term fell to the lowest level since at least 2013. Federal Reserve Governor Michelle Bowman stressed that the central bank’s benchmark lending rate is well positioned to maintain downward pressure on inflation, and that she sees no need to ease policy soon. For his part, Richmond Federal Reserve Bank President Thomas Barkin said, “While we are approaching the inflation target, we are not there yet,” according to Bloomberg.

Markets were betting on the start of interest rate cuts by next March, but Federal Reserve Chairman Jerome Powell dashed these hopes on February 1, causing bond prices to collapse as a result.

Currently, traders are pricing in that the Fed will implement at most four or five quarter-point cuts in 2024, slightly more than the three cuts set by policymakers.

This is a sharp shift from the end of last year, when futures traders were betting on seven moves.

2024-02-12 21:55:15
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