Stocks set for weekly fall, dollar climbs as Fed rate cut expected

It was a shot straight down from 11 a.m. to 1 p.m, then a modest rebound in the afternoon but still nothing too energetic so all the indexes closed substantially down, all because the PPI numbers, like the CPI earlier, showed inflation still sticking. Ironically, even though the import price data also showed a modest increase, that along with increased factory production was taken as a sign of improving inflation and thus the modest afternoon rebound. Consumer sentiment on inflation remained little changed and oil prices have dipped, but the overall sentiment remains that the market is overbought and “some of the real winners have just gone a little bit too far, so you’re seeing them trade off.” No volume data was available for this session. 

Stocks set for weekly fall, dollar climbs as Fed rate cut expected

By Chuck Mikolajczak

Fri March 15, 2024 4:31 PM

DJ: 38,905.66  -137.66       NAS: 16,128.53  -49-24       S&P: 5,150.48  -14.83   3/14

DJ: 38,714.77  -190.89       NAS: 15,973.17  -155.35      S&P: 5,117.09  -33.39   3/15

NEW YORK, March 15 (Reuters) - A gauge of global stocks fell on Friday and was set for a weekly decline that would snap seven straight weekly gains, while the dollar rose and was on track for its strongest week since mid-January, as U.S. inflation data has led to new hopes for interest rate cuts.  Data on Friday showed U.S. import prices increased marginally in February as a surge in the cost of petroleum products was partially offset by modest gains elsewhere, suggesting an improving inflation picture. 

Equities struggled this week after readings on U.S. consumer prices and producer prices indicated inflation remains sticky, dampening expectations the U.S. Federal Reserve will cut rates by its June meeting.  Markets are pricing in a 59.2% chance for a rate cut of at least 25 basis points (bps) by the Fed in June, down from 59.5% in the prior session and 73.3% a week ago, according to CME's FedWatch Tool, opens new tab.  The central bank is widely expected to hold rates steady at its policy meeting next week but investors will be watching the central bank's economic projections, including its interest rate forecast. 

"We seem in a period here where everyone knows rates eventually will be lowered. The expectation of when it happens keeps getting slightly pushed back, but investors still believe it will happen," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.  "It's been a back-and-forth market as people reposition and consider whether some of the real winners have just gone a little bit too far, so you're seeing them trade off."

On Wall Street, the Dow Jones Industrial Average (.DJI), opens new tab fell 190.89 points, or 0.49%, to 38,714.77, the S&P 500 (.SPX), opens new tab lost 33.53 points, or 0.65%, to 5,116.95 and the Nasdaq Composite (.IXIC), opens new tab lost 155.35 points, or 0.96%, to 15,973.17.  For the week, the S&P 500 lost 0.13%, the Dow shed 0.02% and the Nasdaq declined 0.73%.

In addition, a survey from the University of Michigan showed its preliminary reading on consumer sentiment and inflation expectations were little changed in March while a separate report said production at U.S. factories increased more than expected in February.

The yield on benchmark U.S. 10-year notes was up 1 basis point at 4.308% after reaching 4.322%, its highest since Feb. 23. The 10-year yield has jumped 22 bps this week, the most since mid-October.  The 2-year note yield, which typically moves in step with interest rate expectations, rose 3.9 basis points to 4.7297% and has risen 24.6 bps for the week, its largest jump in two months.

Oil prices dipped, a day after topping $85 a barrel for the first time since November. The oil benchmarks were on track to close out the week with a gain of more than 3%. U.S. crude settled down 0.27% lower on the day at $81.04 a barrel and Brent settled off 0.09% to $85.34 per barrel. 

There was no volume data in this report but, per the CBOE, volume was 19.1 billion.  However, this number is no incredibly out of whack with history that there has to be something wrong with it, especially since it’s not mentioned anywhere else. If it was really that much higher than usual, there’d surely be a lot of commentary about it. Since there isn’t, I’m ignoring it and not reporting it.