The operations of the New York Stock Exchange had a roller coaster of emotions due to relevant economic data that was published during this Thursday. In the span of three hours this morning, S&P 500 futures were down 3.9% and then up 3.9%, after taking in US inflation data that hit a 40-year all-time high.
At the close of the market, the Dow Jones finished at a level of 30,038.72 units with an increase of 2.83% compared to Wednesday’s close. The S&P 500 and the Nasdaq followed the same trend with growth of 2.60 and 2.23%, respectively.
“Markets have been looking for signs that inflation is falling, which could prompt the Federal Reserve to pause its rate-hike cycle and assess the economic impact. However, the latest reading suggests that although peak inflation may be behind us, elevated levels of inflation remain stickier than expected, leading to the expectation that the Fed will have to keep rates elevated for longer. time”, analysts at the consulting firm Edward Jones pointed out.
Equity markets have been on a more positive move today after some stabilization in UK government bond and currency markets, in response to reports that it may reverse its fiscal stimulus plan.
The financial sector outperformed market gains ahead of the start of 3Q2022 reporting as big banks report tomorrow such as JP Morgan, Citi, Wells Fargo C., M&S Bank and others, while the energy sector was the biggest gainer on the day due to rising oil prices.
Most analysts have already priced in a nearly 97% chance of a 75 basis point rate hike by the Fed in November. Specialists believe markets are likely to see continued volatility until there is a clear downward trend in inflation data and the Fed starts talking more about pausing its rate hike cycle.
In Mexico, the main indicator of the Mexican Stock Exchange (S&P/BMV IPC) grew 0.19%, reaching a level of 45,766.94 units, while the FTSE BIVA increased 0.20%, reaching a level of 954.06%.
“Today’s market reversal was a head scratcher. Despite a report of higher-than-market-estimated inflation, US equities took a positive turn as some investors are convinced that core inflation will soon start trending lower. Fed tightening will remain aggressive at a 75 basis point pace in November and possibly December,” said Edward Moya, Senior Analyst at OANDA.
Bitcoin ended its second day of growth with 1.17% trading at a price of $19,427.0. At times during the day, bitcoin was getting dangerously close to the summer lows, but in the end it managed to consolidate at $19,000.
Oil breaks negative streak of three days
Crude prices rose and ended a three-day negative rally after energy traders digested a mixed report from the Energy Information Administration (EIA) and a very high inflation reading suggesting that the Fed will tighten rates until something breaks.
The West Texas Intermediate (WTI) finished at a price of 89.23 dollars per barrel with a growth of 2.25% compared to Wednesday’s close, while the Brent closed at 94.65 dollars per barrel, which meant an increase of 2.35%.
“It is somewhat surprising to see crude rising despite a huge draw in the headlines and a blistering inflation report. The inflation report should have triggered a significantly strong dollar, but other currency factors, specifically speculation about a tax change in the UK and another intervention from Japan, prevented the dollar from rising,” the OANDA analyst added.
The weight doesn’t budge
The Mexican peso recovers from the losses recorded during the day, after it was announced that inflation in the United States rose above market estimates, which will continue to test the patience of the members of the Fed.
According to data from the Bank of Mexico (Banxico), the exchange rate stood at 19.9815 dollars with an appreciation of 0.14% compared to Wednesday’s close. During the year, it maintains a strength of 2.6%.
“A provisional support stands at current levels, around 19.95 units. In this sense, a downward breakout would target 19.90 pesos per dollar and, below, there is a critical support of 19.80 units. A further break would point to an extension of the downside. Although the initial reaction to the inflation figures caused a depreciation of the peso, when the mood of investors changed, the Mexican currency traded with slight gains”, OctaFX analysts indicated.
