Precise Investors

Sunday, January 29, 2023

Dollar rallies after higher-than-expected u.s. cpi data


The Consumer Price Index gained 0.1% last month versus expectations for a 0.1% decline and after being unchanged in July, the Labor Department said on Tuesday

The dollar index reversed course to rally sharply and U.S. stocks sank on Tuesday while Treasury yields climbed after data showed U.S. consumer prices rising faster than expected in August, prompting bets for more aggressive Federal Reserve rate hikes.

Oil futures give up earlier gains in choppy trading after declining gasoline prices in August were offset by gains in rent and food costs.

The Consumer Price Index gained 0.1% last month versus expectations for a 0.1% decline and after being unchanged in July, the Labor Department said on Tuesday.

U.S. stock indexes had rallied on Monday and also gained ground last week as investors were betting that Tuesday’s data would show some dampening in inflation.

With the rally over the last week and yesterday, the market’s risk reward coming into this report was a little skewed to the downside anyway even if we did get a report that was in-line or slightly below expectations. This report was a negative surprise with hotter inflation, said Mona Mahajan, senior investment strategist at Edward Jones. This was another disappointment. It’s the old Charlie Brown analogy. Every time we’re ready to kick the ball it’s moved away from us.

The Dow Jones Industrial Average fell 718.06 points, or 2.22%, to 31,663.28, the S&P 500 lost 103.91 points, or 2.53%, to 4,006.5 and the Nasdaq Composite dropped 389.45 points, or 3.17%, to 11,876.96. The pan-European STOXX 600 index lost 1.02% and MSCI’s gauge of stocks across the globe shed 2.00%.

U.S. Treasury yields rose and the inversion of a closely watched part of the yield curve widened after the inflation data also bucked bond investor expectations.

Benchmark 10-year notes last fell 19/32 in price to yield 3.4351%, from 3.362% late on Monday. The 30-year bond last fell 24/32 in price to yield 3.5558%, from 3.513%. The 2-year note last fell 10/32 in price to yield 3.7371%, from 3.571%.

The gap between yields on two- and 10-year notes, seen as a recession harbinger, was at -27.3 basis points.


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