Surging inflation and rising interest rates are weighing on household spending

US stock market: The S&P 500 ended below 4,000 for the first time since late March 2021 and the NASDAQ dropped more than 4% on Monday in a selloff led by mega-cap growth shares as investors grew more concerned about rising interest rates. The NASDAQ closed at its lowest level since November 2020. Apple shares dropped 3.3% and were the biggest weight on the NASDAQ and the S&P 500. 

Microsoft Corp dropped 3.7% and Tesla Inc. fell 9.1%. Investors are worried about how aggressive the Federal Reserve will need to be too tame inflation. The U.S. central bank last week hiked interest rates by 50 basis points. Benchmark 10-year U.S Treasury yields hit their highest levels since November 2018 before easing on Monday. 

Economic Calendar

Markets are digesting the start of a return to a more normal monetary policy environment. Investors have also been worried about an economic slowdown in China following a recent rise in coronavirus cases. The S&P 500 is now down 16.3% for the year so far.

Dow Jones Industrial Average

The Dow Jones Industrial Average fell 0.26% to hit a new 52-week low. The biggest gainers of the session on the Dow Jones Industrial Average were Intel Corporation, which rose 2.18% or 0.94 points to trade at 44.01 at the close. Salesforce.com Inc. added 2.17% or 3.55 points to end at 167.15 and Microsoft Corporation was up 1.86% or 4.92 points to 269.50 in late trade. The biggest losers included International Business Machines, which lost 3.95% or 5.31 points to trade at 129.13 in late trade. JPMorgan Chase & Co declined 2.44% or 2.97 points to end at 118.89 and 3M Company shed 2.14% or 3.26 points to 149.12.

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NASDAQ 100

The NASDAQ index climbed 0.98%. The top performers on the NASDAQ Composite were Baosheng Media Group Holdings Ltd which rose 42.28% to 0.74, Appian Corp which was up 38.59% to settle at 59.62 and Vroom which gained 32.41% to close at 1.43. The worst performers were Embark Technology Inc. which was down 59.03% to 1.43 in late trade, Upstart Holdings Inc. which lost 56.42% to settle at 33.61 and Cipher Mining Inc. which was down 46.75% to 1.72 at the close.

Oil price - Crude Oil market, Brent Oil market

U.S crude oil price settled below $100 a barrel yesterday to its lowest level in two weeks as the demand outlook was pressured by coronavirus lockdowns in China and growing recession risks, while a strong dollar made crude more expensive for buyers using other currencies. U.S. West Texas Intermediate crude settled down $3.33, or 3.2%, to $99.76 a barrel, while Brent crude was down $3.48, or 3.28%, at $102.46 a barrel. 

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Wall Street's main indexes also turned lower in volatile trading on concerns over aggressive monetary policy tightening and slowing economic growth. Early in the session, comments from the Saudi and UAE energy ministers boosted Brent and WTI up by more than $1 a barrel. These are volatile times, the daily price bars are outsized these days as the EU continues to dither over whether or not they are going to embargo Russian oil, which changes the calculus very much as well in both directions. The EU Commission has delayed acting on the proposal.

Precious and Base Metals - Gold price, Silver price, Palladium price

Gold was down today morning in Asia, hitting its lowest level since February 11, as investors eyed the rising dollar and inflation data. Gold futures were down 0.22% to $1,836.96. The Dollar, which normally moves inversely to the gold, inched down on Wednesday morning, but the moves were small. The tightened policy to fight inflation from the U.S. Federal Reserve has fueled five weeks of gains for the dollar. 

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The Fed raised its interest rates to 1% last week. Fed officials on Tuesday reiterated their stance on the aggressive efforts to slow the fastest inflation in 40 years. “I know that families all across America are hurting because of inflation,” U.S. President Joe Biden said in a speech a day before the Consumer Price Index (CPI) came out. 

As investors expect additional increases of the same magnitude from the Fed, they await the U.S. Core CPI, due later in the day, for more clues on the Fed’s monetary policies. The forecasts prepared by Investing.com expected the figure to moderate but stay above 8%. According to the Westpac-Melbourne Institute index, Australia’s consumer sentiment released today fell 5.6% in May from April in the Asia Pacific. 

Trading Signals and Trading Forecasts

Surging inflation and rising interest rates are weighing on household spending. In other precious metals, silver dipped by 0.1%. Platinum edged up 0.1%, while palladium fell 1.2%. Copper prices rose yesterday, helped by a slight pullback in the U.S. dollar, although worries over COVID-19 lockdowns in top metals consumer China and weaker global economic growth kept gains in check. 

We are seeing some bargain-hunting and a weak dollar (is) helping prices today after a massive sell-off in commodities. For base metals, fears of a slowdown in Chinese demand amid a resurgence of COVID-19 have damaged sentiment. However, demand is likely to improve once China emerges from lockdowns. The dollar USD eased after scaling a 20-year peak in the previous session, making greenback-denominated metals less expensive for buyers using other currencies.

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Traditional Agricultures - Corn futures, Wheat futures,  Soybean futures

Soybean futures edged up yesterday, a day after sliding on macroeconomic worries, as traders assessed U.S. planting progress. Wheat traded near even, pressured by recent rainfall.

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