North American News
S&P 500 closes. 4.3% lower in worst day since June 11, 2020
- Major indices snap 4 day up streak with a huge tumble lower
The major indices moved sharply lower today after the higher than expected CPI threw a bucket of ice cold water on the market.
- The S&P index had its worst day since June 11.
- Some of the biggest S&P losers were Meta, Nvidia and AMD
- The biggest Dow losers were Boeing, Home Depot and Intel
- The major indices moved lower after 4 days of gains.
The final numbers are showing:
- The Dow fell nearly 1300 points falling by -1278.37 points or -3.94% at 31104.95
- The S&P fell 0177.74 points or -4.32% at 3932.68
- The Nasdaq fell -632..83 points or -5.16% at 11633.58
- Russell 2000 fell -74.51 points or -3.91% at 183157
US treasury auctions off $18 billion of 30 year bonds at a high yield of 3.511%
- Wi 3.530% at the time of the auction
- WI level 3.530%
- High yield.
- Bid to cover 2.42X vs six-month average of 2.37X
- Tail -1.9 basis points vs. six-month average of -0.7 basis points
- DIrects 17.06% vs six-month average of 17.3%
- Indirects 72.09% vs six-month average of 69.9%
- Dealers 10.85% vs. vs. six-month average of 12.8%
Commodities
Gold bears take on bulls below key daily resistance
- Gold is pressured as the US dollar continues to make highs.
- The US CPI leaves the door open for aggressive tightening by the Fed.
The price of gold was pressured on Tuesday and has fallen by over 1.3% on the day. At the time of writing, the yellow metal is testing the $1,700 level and has reached a low of $1,697.11 so far on the day. Consumer prices handily beat expectations according to the Labor Department report, underlying inflation picked up amid rising costs for rents and healthcare.
This sent both the US dollar and bond yields sharply higher as the expectations for an oversized rate hike from the Federal Reserve. Inflation in the United States ran at an 8.3% annualized pace in August, ahead of expectations for an 8.0% rise. Traders expect 75 basis points when its policy committee meets next week and lower market hopes for a smaller increase. However, there is a one-in-five chance that the Fed will raise rates by a full percentage point, up from zero a day before the CPI report according to FEDWATCH.
The dollar and bond yields both rose following the release of the data, on expectations higher interest rates are on the way, bearish for gold since it offers no yield. The DXY index, a measure of the US dollar vs. a basket of currencies rallied to a high of 109.853 while the yield on the US 10-year note rose to 3.460%, over 1.8% higher on the day.
”While prices are weak, precious metals’ price action is still not consistent with their historical performance when hiking cycles enter into a restrictive rates regime,” analysts at TD Securities explained. ”We expect continued outflows from money managers and ETF holdings to weigh on prices, which will ultimately raise the pressure on a small number of family offices and proprietary trading shops to capitulate on their complacent length in gold.”
Oil jumps on a report that the White House is mulling buying back SPR barrels at $80
- Could the US put a floor under prices?
Headlines are crossing saying the White House is considering buying back SPR barrels when WTI crude falls below $80/barrel, according to a Bloomberg reporter.
EU News
European major indices close with sharp declines as US CPI drags down shares
- Major indices down over 1%
The major European indices are all closing with sharp declines dragged down by the higher than expected US CPI data and tumbling US stocks.
- German DAX, -1.55%
- France’s -1.33%
- UK’s FTSE 100 -1.10%
- Spain’s Ibex -1.5%
- Italy’s FTSE MIB -1.2%
Looking at the benchmark 10 year yields:
- Germany 1.724%, +7.7 basis points
- France 2.287%, +5.5 basis points
- UK 3.154%, +8.4 basis points
- Spain 2.56%, +2.0 basis point
- Italy 3.987%, +4.3 basis points
Other News
Nomura calls for 100 basis points at the September meeting
- Sees a terminal rate of 4.5% to 4.75%
Nomura has raised their assessment for the September meeting to a 100 basis point hike as a result of the higher than expected CPI data today. They also raised their terminal rate in 2023 to 4.5% – 4.75%. The Federal Reserve targets a fed funds rate in a 25 basis point range.
The current rate is a 2.25% to 2.5%. A 75 basis point hike would take the rate to 3.0% to 3.25%. There are 2 remaining meetings one on November 1-2 and the next is on December 13-14.
Cryptocurrency News
Bitcoin extends loss to 7.5% on the day
- Bitcoin once again trading like levered beta
There was a time when bitcoin was touted as an inflation hedge. We can put that to bed as today’s high CPI report has led to a 7.5% rout in bitcoin. It has so far left an ugly outside day on the daily chart that’s chewing into the big jump on September 9.
The only thing bitcoin has shown a correlation with this year is the Nasdaq. It’s proven to be a good forerunner of sentiment but ultimately it’s the economy and the Fed in charge. Today’s hot CPI report has caused a rout in equities with the Nasdaq down 4% and testing session lows.
The crypto trade lately has been around the ethereum merge on Thursday. Those kinds of trades have been of the sell-the-fact variety frequently in the space. This time it looks like the flush is coming early.