Markets take a break before inflation, earnings
Check out Mike Dolan’s day in the US and international markets
Global stocks took a rare New Year’s rally on Tuesday, largely thanks to stabilizing bond markets and a stronger dollar.
A slightly strange narrative developed behind Monday’s rise in stocks, with some citing a Bloomberg report that President Donald Trump’s team is mulling gradual tariff increases — using emergency legislation to raise tariffs by 2%-5% a month until they get concessions from trade. Partners.
While next week may have offered some relief that a broad, one-time rate hike isn’t coming soon, the prospect of months — or years — of gradual rate hikes and such a series of threats doesn’t seem likely. A recipe for a smooth shopping trip or easy inflation.
However, the sell-off in Treasuries, which has been ongoing this year, has stalled for at least the past 24 hours and a slightly more positive stance has emerged overnight in Wall Street stocks and the world.
With December producer and consumer price reports due today and Wednesday, respectively, the benchmark 10-year Treasury yield returned to a 14-month high of more than 4.8% on Monday and the 30-year long-dated bond yield fell 5%. right now.
Helping sentiment on Monday was the release of the New York Fed’s December consumer survey, which painted a more mixed picture of inflation expectations than last Friday’s flash from the University of Michigan. Late last week, the late bond post-mortgage was exacerbated.
The NY Fed poll showed that households expected the inflation path to remain flat at 3 percent from now on. The 3-year outlook rose from 2.6% to 3% in November, while the 5-year outlook rose from 2.9% to 2.7%.
This Fed futures found their footing and the market returned to one interest rate cut this year – in October – compared to the situation yesterday morning, which showed that there is absolutely no value for 2025. A drop in crude oil prices after Monday’s four-month-highest US sanctions on Russia also calmed bond market horses a bit.
However, annual headline and ‘core’ US producer prices are expected to show a sharp increase to 3.4% and 3.8% respectively by late Tuesday.
And more importantly, tomorrow’s Consumer Price Report is expected to show ‘core’ annual inflation, which dropped to 3.3% last month.
Market inflation rates embedded in Treasury inflation-protected securities are now just below 2.5% for the first time since October 2023. The new Fed’s rate of holding 10-year Treasuries, the so-called ‘term premium’ demanded by investors, meanwhile hit nearly 65 basis points on Monday for the first time since September 2014.
