US Stock Market: Current Trends and Upcoming Inflation Data

The US Stock Market Index (S&P500) closed at 4,095.39 on Sunday, February 12th with a slight increase of 0.22%. Although it has gained 2.41% in the last four weeks, its value has decreased by 6.96% over the past year. The Nasdaq saw a decrease of 0.61% and the Dow Jones saw an increase of 0.50%. 

Federal Reserve officials made remarks throughout the week that were seen as aggressive, causing a rise in yields. The 10-year yield rose by 21.2 basis points and the 2-year yield rose by 23 basis points. Traders adjusted their expectations for peak interest rates, with Fed Fund futures now predicting a peak of around 5.2% in July 2023 compared to 4.9% previously. 

The US stock market has faced pressure following last week's Non-Farm Payroll (NFP) report, leading to a decline in stock valuations. Tomorrow's Consumer Price Index (CPI) report will determine if the Federal Reserve's aggressive monetary policy will continue to lower inflationary pressures. The inflation rate remains lower than the Fed's target of 2%, but the decrease is not as fast as expected. Any higher-than-expected figures could result in further downward pressure on the US market. 

XAU/USD – Gold Lowers as Federal Reserve Officials Hint at Aggressive Rate Hikes

Gold dropped below $1,860 per ounce on Friday and is expected to fall for the second consecutive week, because of signals from Federal Reserve officials that were seen as aggressive. These officials restated their determination to lower inflation through additional rate hikes. This occurred after the US jobs report showed stronger results than expected, which could boost consumer spending and continue to increase inflationary pressure. 

Investors are now paying attention to further commentary from the Fed and US consumer sentiment data on Friday, as well as the next US inflation report scheduled for 14^th Feb 2023, to gather information about the direction of Fed policy tightening. Gold is very sensitive to interest rate expectations as higher rates increase the opportunity cost of holding gold, which does not provide a yield and vice versa.