[U.S. market]Rising stocks supported by ‘Goldilocks’ mood – 134 yen level – Bloomberg

The US stock market rose on the 15th. A series of economic indicators released on the day were solid, and concerns about forcing the US Fed to take a hawkish response led to selling, but it recovered towards the end of trading.

At one point, the S&P 500 stock index fell more than 0.7%. The Nasdaq 100 index, which is dominated by large tech stocks, closed 0.8% higher.

U.S. retail sales surged in January for the first time in almost two years, signaling strong consumer demand. The Fed may decide to keep raising interest rates to combat stubborn inflation. The U.S. housing market index posted its biggest gain in February since mid-2020. Rising mortgage rates have eased in recent months, suggesting they are supporting a housing market that has been depressed over the past year.

U.S. retail sales surge for first time in almost two years in January

U.S. NAHB housing market index sees biggest gains since mid-2020 (1)

“Retail sales were strong across the board in January, which together with the strong jobs data shows the underlying strength of the economy,” said Matt Perron, research director at Janus Henderson Investors. “These views are fueling the ‘Goldilocks’ mood that is currently prevailing in the market. The economy is strong and inflation is still too high but is decelerating.”

CFRA chief investment strategist Sam Stovall doesn’t expect a rate cut this year. “That probability is dwindling. A rate cut is more likely to start in the first half of 2024,” he said.

US Treasuries

U.S. Treasuries generally fell. Two-year bond yields hovered around 4.6%. At one point, it even rose by 8 basis points (bp, 1 bp = 0.01%).

“The Fed will see recent economic data as a boost to plans for another rate hike in the first half of the year,” Bill Adams, chief economist at Comerica Bank, said in a note. “The economy has generally performed better than expected so far this year, and the pace of the slowdown in inflation has slowed since the start of the year,” he wrote.

foreign exchange

In the foreign exchange market, the dollar index rose to its highest level since early January. With retail sales and the New York Fed manufacturing index surpassing expectations, expectations for further US interest rate hikes have strengthened.

NY Fed manufacturing business index, still contracting zone improved more than market forecast (1)

The dollar rose to the 134 yen level against the yen. At one point, it was 134.36 yen, up 0.9%.

“The repricing of interest rate hikes is likely to continue,” said Valentin Marinov, head of G10 currency strategy at Crédit Agricole CIB. We expect it to be above the 5.25% suggested in .

Calvin Shih and other BNP Paribas strategists commented on the expected appointment of Kazuo Ueda as the next governor of the Bank of Japan, saying, “The Bank of Japan may keep its short-term policy rate unchanged while further adjusting its yield curve control. It is consistent with our view that it is high.”

Among other 10 major currencies, the Australian dollar weakened. The British consumer price index (CPI) also led to a drop in the pound.

UK inflation falls to 10.1% in January, market forecast 10.3%

crude

New York crude oil prices continue to fall. Selling increased as it became clear that US crude oil inventories had swelled to the highest level since the summer of 2021. A strong dollar also put selling pressure on almost all commodities.

Crude oil prices were reluctant to fall after the International Energy Agency (IEA) raised its outlook for global oil demand. The revision comes as China abandons draconian coronavirus containment measures and shifts focus to reopening its economy.

IEA raises global oil demand outlook as China reopens

“The demand outlook is improving, but the supply outlook is not,” said Josh Young, chief investment officer at Bison Interests. “China has increased its physical purchases of crude oil over the past two weeks, which is taken as a sign that China is slowly reopening its economy,” he said.