In a speech yesterday Fed Chair Powell suggested that the Fed may not have done enough yet to get inflation back to its long-term target leaving the door open to future interest rate hikes or to leaving interest rates at higher levels for longer that investors had been thinking. This pushed the US 10-year treasury note yield back up above 4.60% where it remains this morning. Don’t forget that Australia’s central bank hiked interest rates earlier this week after a five-month pause, and made similar comments to Powell.
Large cap US indices pulled back 0.6%-1.0% on the Powell comments, and the small cap Russel 2000 dropped 1.6%. This morning US index futures are trading flat to up 0.3%, but European markets are selling off with the Dax down 0.6% and the FTSE down 1.25%.
Trading action is commodities is mixed this morning with US and Brent Crude Oil bouncing 1.1%, while Natural Gas is down 0.4% and Copper is down 0.5%. Action is split in alternative currencies as well. Bitcoin is rallying 2.4% while Gold is down 0.9% and Silver is down 1.4%.
It’s a quiet day for economic and earnings reports. The main event overnight was Constellation Software* beating expectations ($22.33 vs street $20.71). This means that investors focus may turn to next Tuesday when the US Consumer Price Index inflation report is due and earnings season for US retailers kicks off with results from Home Depot.
*Shares of Constellation Software are held in portfolios managed by SIA Wealth Management.