The latest Daily Market Update on Thursday, May 11, 2023, showed that U.S. equities rose and bond yields slid after the latest inflation data showed that the consumer price index (CPI) had risen at a slightly slower-than-expected pace in April. The CPI increased by 0.4%, which was higher than the 0.1% rise in March. However, the CPI’s year-on-year gain of 4.9% in April was lower than the 5.0% year-on-year gain in March.
Equity Markets and Bond Yields
The Dow Jones Industrial Average fell by 0.09%, the S&P 500 gained 0.45%, and the Nasdaq Composite added 1.04%. The Dollar Index eased 0.20% as the CPI data suggested the Fed’s most aggressive rate hikes in four decades were yielding results.
In terms of bond yields, the two-year Treasury yield, which typically moves in step with rate expectations, slid from 4.05% before the CPI news and dropped to 3.908%. Benchmark 10-year notes fell 8.1 basis points to 3.441%.
Inflation and Interest Rates
The Dollar retreated on expectations that the Fed will pause its interest rate hikes to curb high inflation. The CPI data showed moderate inflation, which was a relief for investors as they expected the Fed to act aggressively in raising interest rates to curb inflation.
Cryptocurrencies and Bankruptcy Filing
Most cryptocurrencies pared earlier gains as of late Wednesday, with Bitcoin (BTC), briefly falling below $27,000. BTC was changing hands at $27,481, down 0.5% in the last 24 hours, after swinging between a day high of $28,322 and a day low of $26,883. Ethereum (ETH) was down 0.7% at $1,835. Both BTC and ETH are down 7% and 4% so far this month but are up 65% and 53% year-to-date.
In related news, Seattle-based Bittrex filed for bankruptcy on Monday, saying it intended to return customer funds and wind down its U.S. operations. The company’s international affiliates will continue to operate crypto exchanges for customers outside of the U.S.
Debt Ceiling Talks and Oil Prices
Headwinds still loom as detailed talks on raising the U.S. government’s $31.4 trillion debt ceiling began on Wednesday. The Treasury Department has warned that a destabilizing default could come as soon as June 1.
WTI crude futures fell 1.6% to settle at $72.56 a barrel, and Brent settled down 1.3% at $76.41 a barrel. Crude oil futures gave up initial gains after the data’s release on concerns that a rise in U.S. inventories showed weakening demand.
ECB Interest Rates
Meanwhile, the European Central Bank’s (ECB) key interest rate is approaching its peak, but further adjustments are still necessary, according to ECB Governing Council member Mario Centeno. He added that he expected rates to start easing at some time next year. EUR/USD rose 0.19% to 1.0981.
