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It’s the day after the FOMC meeting, where Fed chair Powell of the door opened for a lot of things including the potential 50 basis point hike.
In actuality, the market has been doing the tightening for the Fed as rates have moved up including mortgage rates out the longer end and shorter term rates. The funding rate or Fed funds rate is the rate that remains lower (and the one that the Fed explicitly controls), but yields like the two year risk-free treasury yield has risen sharply, and is currently trading at its highest level since February 2021. Yields in that part of the yield curve are up from a post Covid low of 0.10% and currently trades around 1.2% (the rate is up over 10 basis points today – the 2 year is up 6 consecutive weeks from around 0.60%). Of course real yields (compared to inflation) are way negative with hopes that inflation does come down later in the year and next as supply constraints ease and the hope that wage/price inflation does not continue.
The US stocks are trading mixed in volatile premarket trading. Yesterday, strong gains were erased by the end of day close with the NASDAQ the only major indice closing higher but that was just barely at +2.82 points. Apple will report earnings after the close.
Today the fourth quarter GDP will be released with estimates of 5.3%. The Atlanta Fed GDP model rose to 6.5% yesterday from 5.1% in its last estimate before today’s release. Also on the schedule today is durable goods orders in the weekly unemployment claims at 8:30 AM ET. Pending home sales will be released at 10 AM ET
In other markets, the morning snapshot shows:
- Spot gold is trading down -$12.86 or -0.71% $1806.49
- Spot silver is down $0.51 or -2.2% at $23.02
- WTI crude oil is trading up $0.73 at $88.09
- Bitcoin is trading back below $37,000 at $36,706
In the premarket for US stocks, the major indices are trading mixed to higher in continued volatile trade
- Dow industrial average down three points after yesterday’s -129.64 point decline
- S&P index up up 14 points after yesterday’s -6.54 point decline
- NASDAQ index up eight points after yesterday’s 2.82 point rise
In the European equity markets, major indices are also mixed.
- German DAX, is down -0.4%
- France’s CAC is Dow -2%
- UK’s FTSE 100 is up +0.5%
- Spain’s Ibex it is up 0.5%
- Italy’s FTSE MIB is up 0.35%
The US 2 year yield is trading sharply higher as investors price and a potential 50 basis point hike by the Fed in March. The longer end is lower as worries about slower growth weighs on rates further out the curve.
The European benchmark yields are mostly higher with Italy down modestly. The German 10 year yields are moving back toward 0.0% at -0.039%. The high yield today reached -0.023%.
