- FOMC Minutes: Most participants assessed another hike would likely be appropriate by year end
- The US treasury sells $39 billion of 10 year notes at a high yield of 5.300% versus WI level of 5.317%
- Tropical Storm Isaias spins up in the Gulf
- New York Fed inflation expectations: One year inflation expectations hit the highest since 2023
- EIA weekly US crude oil inventories -3186K vs +1722K expected
Markets:
- Gold down $53 to $4110
- WTI crude oil down 96-cents to $88.48
- US 10-year yields up 0.2 bps to 5.27%
- S&P 500 down 0.1%
- USD leads, EUR lags
It was one of those days where it looked like market sentiment could fall apart due to rising bond yields but then the market turned and made an improbable recovery despite no real catalyst. The main help came from the oil market which reversed despite tighter US inventories and another attack on Saudi pumping stations.
The worries early were largely European as yields there moved higher, some of that was mitigated by a report saying France was considering more short-dated debt issuance in what’s a classic move from countries facing a fiscal squeeze. It worked for the moment as global yields reversed earlier rises. The US was no different as 30s fell from a 24-year high of 5.73% to 5.66%. The solid 10-year auction may have added some downside pressure to yields as well.
The equity market was resilient despite a poor start. Steady BTD activity clawed back most of the losses. Power generation and Micron were among the winners along with healthcare. Laggards were led by Caterpillar, which fell 6% while some chip names lagged as well, including TXN, MCHP and NXPI. Decliners led advancers by nearly 2:1.
In FX, the US dollar largely held onto gains despite the turn in yields as the buying remains relentless. There appears to be some shift away from euros on debt worries while the commodity currencies are sagging despite better signs of global growth.
The FOMC Minutes didn’t contain any surprises but really underscored the cadence of waiting in October and hiking in December. The messaging is getting so firm that it’s adding risks around the September CPI report but for the remainder of this week, the US economic calendar is relatively clean.
This article was written by Adam Button at investinglive.com.