Commodities rise, US stocks fall

wallstreetcn ·  Apr 3 08:55

Source: Wall Street News

The market's concerns focus on whether the Federal Reserve can actually control inflation. The rise in oil prices and bond yields has also put pressure on the stock market. Expectations of two or fewer interest rate cuts are rising, and some analysts are even beginning to predict that the Federal Reserve may not cut interest rates at all this year.

US stocks continued to be sluggish at the beginning of the second quarter. The S&P 500 index fell for two consecutive days, closing down nearly 0.7% overnight, the biggest decline in nearly a month. 80% of the constituent stocks closed down.

After Syria and Iran accused Israel of carrying out an air strike on the consular office building of Iran's embassy in Syria, oil prices rose in response. Benchmark Brent and WTI crude oil futures both closed up 1.7% to 88.92 US dollars per barrel and 85.15 US dollars per barrel, respectively. This is also the third consecutive trading day for crude oil to close higher.

Meanwhile, the price of gold hit a record high for the third consecutive trading day, rising 1.2% to $2,277 per troy ounce.

London basic metals futures generally had a good start in the second quarter. Most of them rose and rose more than 1% on Tuesday. Among them, Lunn Aluminum rose nearly 2%, and Luntong closed extremely close to the 9,000 US dollar mark for the first time in two weeks. Together with Lunzinc and Lunnickel, it rose for two consecutive days.

Also, the Bloomberg Commodity Index closed overnight to its highest level since November last year, driven by oil and gold prices.

The market's concerns focus on whether the Federal Reserve is actually keeping inflation under control. According to a series of data released recently, inflation is burning again.

Liz Young, head of investment strategy at SoFi, said: “Investors are increasingly concerned about a possible recovery in inflation.”

The rise in oil prices and bond yields has also put pressure on the stock market. In particular, the impact of tension in the Middle East on oil supply has become a focus.

Overnight, 10-year and 30-year US Treasury yields reached their highest values since November last year.

Inflationary pressure is once again highlighted. Will the Federal Reserve cut interest rates this year?

In March, the Federal Reserve reiterated their forecast to cut interest rates three times this year. However, increasing inflationary pressure has called this forecast into question.

Futures contracts linked to the federal funds rate show that the possibility of cutting interest rates twice or less is rising. Some analysts have even begun to predict that the Federal Reserve may not cut interest rates at all this year.

Young pointed out, “The market is evaluating whether interest rate cuts will be delayed, whether the number of interest rate cuts will decrease, and the possibility of not cutting interest rates this year is gradually increasing.”

The US economy has remained resilient this year. The Atlanta Federal Reserve's GDPNow model raised its forecast for actual growth on Monday, with manufacturing data stronger than economists' expectations.

The model now predicts a 2.8% year-on-year increase in US GDP in the first quarter, 0.5 percentage points higher than previously forecast. Signs of rising long-term interest rates suggest that inflation may be more stubborn than expected by the Federal Reserve.

Cleveland Federal Reserve Bank Governor Meister said on Tuesday that he is in no hurry to cut interest rates this year, and believes that the risk of cutting interest rates too early is greater than delaying interest rate cuts. The possibility that interest rates will remain high for a long time has weakened Wall Street's appetite for risk.

Despite the overall correction in US stocks, some investors still think there is no need to panic. The S&P 500 has risen 9.1% so far this year, making it the strongest first quarter since 2019.

Zachary Hill, head of portfolio management at Horizon Investments, said:

“Overall, the market is moving in the right direction. Given the rise in bond yields and oil prices, it is reasonable for the market to pause its rise. But that doesn't change our overall judgment.”


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