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Market Heatwave: Wall Street’s CPI Drama and Crypto’s ETF Fever

Market Update - Daniel Ang The Accidental Trader Traders Academy International 12

The latest US inflation data didn’t shake Wall Street as expected. Here’s a snapshot of the key market movements on this notable Friday, January 12, 2024.

Key Points:

  • 📊 Steady Equities: Nasdaq Composite marginally up (+0.004%), S&P 500 slightly down (-0.07%), and Dow Jones near historical high (0.04% up).
  • 💹 Inflation Surprise: December’s CPI rose 0.3%, surpassing expectations and hinting at the Fed’s interest rate strategy.
  • 🌐 Currency & Commodities: Dollar holds firm, while crude oil prices rise amid Middle East tensions and gold retreats on inflation data.

In what was anticipated to be a market-shaking event, the release of US inflation data ended up having minimal impact on Wall Street. Major equity indices, including the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average, remained largely unchanged, with the latter nearing its second-highest closing ever at 37,711, just shy of its historic peak.

The Labor Department reported that December’s Consumer Price Index (CPI) increased by 0.3%, a slight uptick from November’s 0.1%. This rise, primarily driven by shelter costs, pushed the annual CPI to 3.4%, exceeding the 3.1% rise in November and surpassing economists’ forecasts.

This hotter-than-expected inflation reading, coupled with robust non-farm payroll numbers, suggests that the Federal Reserve might refrain from cutting interest rates in their upcoming FOMC meeting. The labor market’s strength was further emphasized by a surprising drop in new unemployment claims, indicating sustained tightness.

In the foreign exchange realm, the Dollar Index hovered around 102.26, a slight decline from Thursday’s peak but still significantly above December’s lows. The Euro and British Pound made modest gains against the Dollar, while the Japanese Yen remained relatively stable.

The commodities market experienced notable movements. Brent and West Texas Intermediate (WTI) crude prices rose by approximately 1%, fueled by geopolitical tensions in the Middle East following Iran’s seizure of an oil tanker off the coast of Oman. Gold, however, retreated to a one-month low in response to the stronger Dollar and anticipations of persisting high-interest rates.

In the burgeoning world of digital assets, the approval of Bitcoin ETFs by the US Securities Exchange Commission led to a dramatic surge in BTC/USD, reaching just under the $49K mark before experiencing a pullback. As the market eyes the potential approval of Ethereum ETFs, ETH/USD soared to an 18-month high, creating a buzz of excitement and speculation in the crypto community.

This day in the financial markets has been a blend of the expected and the unexpected, with various sectors reacting differently to the unfolding economic narrative.

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