Yesterday, the Nasdaq Composite index recorded its best daily session since mid-November 2023, growing by 2.2%. The SP500 did somewhat worse, with a growth of 1.4%. Notably, the Dow Jones closed the day in the positive, but moderate, with a 0.6% gain. The EUR/USD exchange rate approached 1.0980, but by the end of the day, it was again oscillating around 1.0950. In the meantime, yields on U.S. bonds fell below 4.32% at some point. Crude oil lost significantly, reducing its value by more than 4%.
Yesterday on Wall Street, there was a relatively high appetite for risk. Investors are waiting for Thursday’s inflation data from the U.S. and want to gain greater clarity about the Fed’s future interest rate cuts in 2024. Currently, the Fed Fund’s futures contracts value around 58% chance for a 25 basis points cut in March, compared to almost 70% last Friday.
Yesterday’s mood was somewhat supported by Raphael Bostic’s words from the Atlanta Fed branch. He stated that inflation had fallen more than he had expected. However, to avoid an overly dovish tone, the U.S. institution’s representative added that it is too early to conclude that the fight against inflation is over. Bostic also indicated possible two cuts in the second half of this year. The atmosphere may have been further supported by Michelle Bowman, who stated that it would soon be appropriate to start the process of lowering interest rates.
Crude oil (WTI -4.12%) lost significantly yesterday, a fallout of the Sunday decision by Saudi Aramco (the state-owned oil conglomerate) to lower the price of Arab Light crude for Asian recipients in February to the lower level in 27 months. The WTI variant hit a bottom below 70.5 USD, and Brent just under 75.5 USD. Consequently, 1-year inflation swaps in the U.S. dropped below the level of 2%. Meanwhile, 1-year consumer inflation expectations, collected by the Fed’s New York department, fell to the lowest level in three years, a decline of almost half a percentage point since last November.
Łukasz Zembik Oanda TMS Brokers
