Markets Overview

  • ASX SPI 200 futures little changed at 7,595.00
  • Dow Average down 0.1% to 38,671.69
  • Aussie up 0.5% to 0.6523 per US$
  • U.S. 10-year yield rose 2.1bps to 4.1754%
  • Australia 3-year bond yield rose 2.8 bps to 3.70%
  • Australia 10-year bond yield rose 2.1 bps to 4.13%
  • Gold spot down 0.5% to $2,024.26
  • Brent futures up 0.7% to $82.19/bbl

Economic Events

Wall Street notched a milestone, with the S&P 500 topping 5,000 amid a renewed rally in big tech and hopes the Federal Reserve will soon be able to cut rates — bolstering the outlook for corporate profits.

Equities powered ahead to close at another all-time high, capping a fifth straight week of gains. From its March 2020 pandemic-low, the US benchmark gauge has more than doubled, fueled by bets on a soft landing and the artificial-intelligence euphoria. In fact, the advance Friday was driven by the index’s most-influential group — technology — with the Nasdaq 100 up 1%.

A few days ahead of the key consumer price index, investors breathed a sigh of relief as a government report — which is usually ignored by markets — confirmed inflation progress at end of 2023.

In the immediate aftermath of the data, Treasuries rose — but quickly reversed that move. The two-year yield went back to levels seen since before the Fed’s December “pivot.” Fed Bank of Atlanta President Raphael Bostic said he’s “laser focused” on returning inflation to target, and his Dallas counterpart Lorie Logan said she sees no urgency to cut rates.

Other News

The pulse of US inflation likely continued to slow at the start of the year, helping to feed expectations that the Federal Reserve will find interest-rate cuts more palatable in the coming months.

The core consumer price index, a measure that excludes food and fuel for a better picture of underlying inflation, is seen increasing 3.7% in January from a year earlier.

That would mark the smallest year-over-year advance since April 2021, and underscore the inroads Fed Chair Jerome Powell and his colleagues have made in beating back inflation. The overall CPI probably rose less than 3% for the first time in nearly two years, economists forecast Tuesday’s report to show.

While acknowledging that progress, policymakers have been cool to the idea that rates may be reduced as soon as next month.

Their patience has roots in an economy that’s flashing green lights, the biggest of which is the labor market. Durable employment growth has kept consumers spending. A separate report on Thursday is projected to reveal another increase in retail sales, excluding motor vehicles and gasoline.

The cooling of inflation, along with expectations that borrowing costs will head lower this year, explains the recent improvement in consumer confidence. A University of Michigan survey scheduled for release on Friday is forecast to show an index of sentiment holding near the highest level since July 2021.

Investors will also monitor Fed officials speaking in the days following the CPI data, to gauge the timing of any future rate cut. Among those on the schedule are regional bank presidents Raphael Bostic of Atlanta and Mary Daly of San Francisco, who both vote on policy this year.