Markets Overview
- ASX SPI 200 futures little changed at 8,252.00
- Dow Average down 0.1% to 42,460.79
- Aussie up 0.3% to 0.6737 per US$
- US 10-year yield little changed at 4.0746%
- Australia 3-year bond yield rose 4.5 bps to 3.79%
- Australia 10-year bond yield rose 3.3 bps to 4.22%
- Gold spot up 0.8% to $2,629.33
- Brent futures up 3.8% to $79.46/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$1 Billion 2.75% 2028 Bonds
Stocks fell after data showed hotter-than-expected inflation and a slowdown in the labor market, amplifying the debate on whether the Federal Reserve will opt for a smaller rate cut next month or a pause after a large September reduction.
Following a rally to all-time highs, the S&P 500 took a breather. While Thursday’s economic figures were not perceived by Wall Street as catastrophic, they certainly highlighted the Fed’s challenge of bringing inflation back to the 2% target without cooling the jobs market too much. And that has added to the debate about the Fed’s next steps. For now, bond traders continued to bet the central bank will reduce the pace of cuts to 25 basis points in November.]
Three Fed policymakers — John Williams, Austan Goolsbee and Thomas Barkin were unfazed by a higher-than-forecast consumer price index, suggesting officials can continue lowering rates. The outlier was Raphael Bostic of the Atlanta Fed. In an interview with the Wall Street Journal he revealed that, in projections released in September, he had called for one additional quarter-point cut this year. The Fed has two remaining meetings in 2024.
“One slightly hotter-than-expected CPI reading doesn’t mean a new wave of inflation has been unleashed, but the fact that it accompanied a jump in weekly jobless claims may add to short-term market uncertainty,” said Chris Larkin at E*Trade from Morgan Stanley. “These weren’t good numbers — but that doesn’t mean they upended the larger outlook for solid economic growth and moderate inflation.”
In a note titled “The Fed’s quandary as inflation warmer while labor cooler,” Quincy Krosby at LPL Financial says the latest economic numbers were not the combination the Fed wants to see.
“If inflation data continues to indicate that prices are generally rising amid a backdrop of a cooler labor market, the Fed’s next meeting will undoubtedly involve a more heated discussion of which of the Fed’s mandates takes precedence,” she noted.
The S&P 500 fell 0.2%. Most major groups retreated, though energy shares joined oil higher as the market awaited Israel’s response to Iran’s missile attack. Megacaps were mixed, with Nvidia Corp. up and Apple Inc. down. Tesla Inc. edged lower ahead of the launch of the company’s fully self-driving vehicle.
The yield on 10-year Treasuries was little changed at 4.07%. The Bloomberg Dollar Spot Index wavered.
