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Treasury Yields Fall as Traders Anticipate Economic Data Outlook

Hillary Opondo Jun 29, 2023

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Wall Street kick-started a light week with a slightly lower move in treasury yields ahead of the Federal Reserve announcement and economic data release. The 2-year treasury yields traded at 4.729% after losing two basis points, while the 10-year treasury was at 3.715% after a two basis points drop. Generally, prices and yields alternate in opposite directions, with a 0.01% price change per basis point. The Federal Reserve’s next monetary policy anxiety limited trades.

In any case, the Nasdaq Composite jumped to 13,591.75 by 0.27%, the S&P 500 dropped to 4,376.86 by 0.04%, and the Dow Jones Industrial Average fell to 33,853.66 by 0.22% or 74.08 basis points. These moves came amid mutiny attempts against the Russian military during the weekend, which took over Rostov and moved for about 200 kilometers toward Moscow. Besides, the upcoming US economic outlook impacted the markets.

In simple words, the outlook provides insights into the Federal Reserve’s inflation gauge and the personal consumption expenditure price index. Fed’s Chairman Jerome Powell cautioned last week that inflation might retain its high levels. Thus, the central bank required more time to lower the cost of living. He indicated that the Federal Reserve would likely propose further interest rate hikes while speaking before the House of Congress.

Meanwhile, several Federal Reserve officials echoed the suggestion for further rate hikes. But traders remained curious about what would be the next likely interest rate hike and when the Federal Reserve would announce it. The CME Group tool indicates that the markets are pricing at about 77% possibility of another rate hike in the July meeting. Powell also attended the ECB Forum on Banking in Portugal, where he explained the central bank's plans.

He addressed a panel of stakeholders like Kazuo Ueda (Bank of Japan Governor), Christine Lagarde (European Central Bank President), and Andrew Bailey (Bank of England Governor) at the forum. In the meantime, chip stocks dropped 24 hours after Wall Street publicized that the United States considered new export regulations for China. SOXX (iShares Semiconductor ETF) fell while the NVidia AI beneficiary declined by over 1%.

Above all, Netflix shares rose by over 3%, Tesla increased by around 2%, and Google-parent Alphabet jumped by about 1%. Investors rallied to close out the most profitable NASDAQ first half in nearly 40 years amid an optimism wave around AI. The Nasdaq Composite and the S&P 500 are 30% and 14% higher.

Hillary Opondo

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