Markets Overview

  • ASX SPI 200 futures little changed at 8,435.00
  • Dow Average up 0.3% to 44,604.73
  • Aussie up 0.3% to 0.6295 per US$
  • US 10-year yield rose 3.6bps to 4.5332%
  • Australia 3-year bond yield fell 1.1 bps to 3.81%
  • Australia 10-year bond yield fell 1.4 bps to 4.39%
  • Gold spot down 0.3% to $2,900.39
  • Brent futures up 1.6% to $77.05/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$400 Million 2.75% 2041 Bonds
  • 11:30: (AU) 4Q Owner-Occupier Loan Value QoQ
  • 11:30: (AU) 4Q Home Loans Value QoQ
  • 11:30: (AU) 4Q Investor Loan Value QoQ

Treasury yields rose and stocks fluctuated as Federal Reserve Chair Jerome Powell reiterated the central bank is in no rush to cut rates.

Bonds fell across the curve, with money markets continuing to fully price in just one rate cut by the Fed this year. The S&P 500 remained stuck in a tight range. Most big techs dropped, though Meta Platforms Inc. climbed for a 17th consecutive day. Intel Corp. and GlobalFoundries Inc. surged as Vice President JD Vance said the US will make sure the most sophisticated artificial-intelligence hardware is made domestically.

Just a day ahead of a key inflation reading, Powell signaled that officials will be patient before lowering borrowing costs further as the economy remains strong. He also told Congress it is unwise to speculate on tariff policy at this time. Powell is due to testify before the House Financial Services Committee on Wednesday.

To Krishna Guha at Evercore, the Fed is taking an “extended time-out on rates,” but remains oriented towards lowering borrowing costs further if and when there is further sustained inflation progress.

The S&P 500 was little changed. With a high-low range sitting below 0.6% for two days in a row, the gauge was mired in a stretch of tight trading not seen since mid-December. The Nasdaq 100 dropped 0.3%. The Dow Jones Industrial Average rose 0.3%.

“The stock market has been stuck in a sideways range,” said Matt Maley at Miller Tabak. “Despite the narrative on Wall Street, the market is not broadening out to the degree that some people are trying to portray. So, until we break out of this range, investors will want to remain nimble.”

The yield on 10-year Treasuries advanced four basis points to 4.54%. The Bloomberg Dollar Spot Index lost 0.3%.

US inflation showed scant signs of downward momentum at the start of the year, while healthy job growth undergirded the economy, backing the Fed’s stance to hold the line on interest rates for now.

Shortly before the second half of Powell’s two-day testimony marathon, a report is forecast to show the consumer price index excluding food and energy rose 0.3% in January for the fifth time in the last six months.

Compared with a year earlier, core CPI is forecast to have risen 3.1%. While marginally lower than than the annual figure for December, that’s just a 0.2 percentage point decline from the middle of last year.

“Recent inflation prints, coupled with a strong jobs market will allow patience from the Federal Reserve who will likely hold policy at its target range of 4.25%-4.50% in March,” said Josh Hirt at Vanguard.

A survey conducted by 22V Research shows 41% of respondents expect the market reaction to CPI to be “risk-off,” 31% said “risk-on” and 28% “mixed/negligible.”

In addition, 37% of investors surveyed by 22V believe that financial conditions need to tighten.

“This value has come down significantly since last month,” said Dennis DeBusschere at 22V. “59% believe that core CPI is on a Fed friendly glide path without a significant tightening of financial conditions, and 4% think there will be a recession.”

“The volatility around this week’s inflation reading may be more limited than in the past, as the Fed will, in all likelihood, still get another handful of inflation (and jobs) reports before making any additional changes to interest rates,” said Matthew Weller at Forex.com and City Index.

That said, a pickup in price pressures could lead traders to start asking whether the Fed’s rate-cutting cycle may be completed already, complicating the path forward for a central bank that has clearly been hinting that the easing cycle isn’t done yet, he added.