*
Main U.S. indexes red: Nasdaq down >1%
*
Energy down most among S&P sectors; utilities lead gainers
*
Euro STOXX 600 index off ~0.1%
*
Dollar ~flat; gold slips; crude slides >3%; bitcoin up >2%
*
U.S. 10-Year Treasury yield edges up to ~3.85%
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
FRIDAY DATA FORECASTS COOLING ECONOMIC WEATHER (1102
EST/1602 GMT)
Investors headed into the long holiday weekend with two
relatively minor bits of data, but together these economic
supporting players amount to good news for Fed watchers.
The prices for goods and services imported to the United
States dropped by 0.2% in January, as expected, but
from a downwardly revised December print of -0.1% (previously
stated as a 0.4% gain).
This marks the metric's seventh consecutive monthly decline.
By line item, a 4.5% monthly drop in gasoline and a 2%
decline in industrial supplies offset a 1.3% jump in food prices
and a 0.6% rise in the cost of imported vehicles/parts.
"However encouraging, (the report) will likely factor little
into the Fed's decision to raise rates at the March meeting, and
potentially the May meeting as well, as it continues to wrangle
with stubborn inflation," writes Matthew Martin, U.S. economist
at Oxford Economics.
"Slowing demand domestically and abroad, alongside a weaker dollar, will keep downside pressures on import prices," Martin adds. Year-over-year, import prices are up a mere 0.8%, nabbing the honor of being the first major indicator to have touched - and actually dipped below - Powell & Co's average annual 2% inflation target.
While this week's CPI and PPI reports came in warmer than
most market participants would have preferred, import prices
joins those - along with hourly wages - in showing yearly price
growth slowing down.
One week from today, the PCE price index will complete the
picture. Economists polled by Reuters expect year-over-year core
PCE to inch down 10 basis points to 4.3%, still more than double
the magic number.
A separate report from the Conference Board (CB) hinted at
economic softening, the desired result of the Fed's barrage of
policy rate hikes.
CB's leading index , an amalgamation of ten data
points - including jobless claims, ISM new orders, building
permits, Treasury yield spreads, the S&P 500, among others -
dropped by 0.3% in the opening weeks of 2023, extending
December's 0.8% slide and sticking on the consensus landing.
It marks the index's ninth straight month in negative
territory.
"Among the leading indicators, deteriorating manufacturing
new orders, consumers’ expectations of business conditions, and
credit conditions more than offset strengths in labor markets
and stock prices to drive the index lower," says Ataman
Ozyildirim, CB's senior director of economics. "The contribution
of the yield spread component of the LEI also turned negative in
the last two months, which is often a signal of recession to
come."
Here's a look at the index compared with CB's own near-term
consumer expectations:
Wall Street is lower in mid-morning trade. However, the Dow , which briefly turned positive, is now off just slightly.
Tech and chips are down more than most, but
energy , weighed down by sliding crude prices , is
suffering the session's biggest percentage loss among S&P 500 sectors.
(Stephen Culp)
*****
BOFA TACKS ON 25 BASIS POINT HIKE FOR JUNE FOMC MEETING
(1004 EST/1504 GMT)
After a couple of weeks full of data that included readings
on consumer and producer inflation along with some labor market
reports, economists at Bank of America Global Research have
added a 25 basis point (bps) hike in June to its forecast for
Federal Reserve rate hikes.
In a note to clients, BofA chief U.S. economist Michael Gapen said that while they see some of the strength in the labor market data as attributable to some seasonal adjustments and other data distortions, "it is hard to ignore revisions to employment growth in 2022 that leave labor market momentum in a more favorable position then before." Regarding the inflation data, BofA notes the details of the consumer price index (CPI) report earlier this week were "discouraging" while the producer price index (PPI) report on Thursday suggested personal consumption expenditures will "also be solid in January."
After initially forecasting 25 basis point hikes in March and May, followed by a pause from the Fed, BofA said "resurgent inflation and solid employment gains mean the risks to this outlook are too one-sided for our liking." As such, hikes in March and May appear very likely and the firm believes the central bank might have to hike further if inflation, job growth and consumer demand do not soften.
In adding the 25 basis point hike for June, the terminal
rate would go up to 5.25%-5.50%, but BofA is still forecasting a
first rate cut by the Fed in March 2024.
(Chuck Mikolajczak)
*****
U.S. 10-YEAR TREASURY YIELD HITS A MORE THAN 3-MONTH HIGH (0900 EST/1400 GMT) The U.S. 10-Year Treasury yield has hit its highest level since early-November. With this, U.S. equity index futures are lower on fears that accelerating inflation in the face of a sturdy U.S. economy could prompt the Federal Reserve to err on the side of caution by keeping monetary policy restrictive through the year. The yield hit a high of 3.9290%, and is on track to rise for a fourth-straight week: That said, it has since backed away to around 3.89%. There is yield resistance in the 3.9050%-3.98% zone which includes the late-December 2022 high, a weekly Gann Line (now around 3.94%), and the 23.6% Fibonacci retracement of the 1981-2020 yield bear market at 3.9765%.
This zone has the potential to cap this latest yield rise. In that event, the yield could once again chop its way back down to the 3.50%-3.30% area as a number of weekly Gann Lines are providing yield support in this zone. The yield's mid-January trough was at 3.3210%. A thrust above 3.98%, confirmed by the weekly close, however, can put traders on guard for the yield to challenge the 4.25%-4.3380% area. This zone includes another weekly Gann Line as well as the October 2022 high. The 4.3380% mark was the highest level since November 2007. The 4.3380% level protects against the potential for a further rise to the 5% area. Coming under 3.3210% would instead potentially refocus on the 2.5160% early-August 2022 trough.
(Terence Gabriel)
*****
FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT
- CLICK HERE
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
10YrY02172023 Inflation Leading indicators ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
