Dollar, Treasury Yields Rise As Small Caps Fall: August Inflation Crushes Odds Of 50-Point Fed Rate Cut
Portfolio Pulse from Piero Cingari
August inflation in the U.S. fell to 2.5%, but core inflation remains high at 3.2%, affecting market expectations for a Fed rate cut. The SPDR S&P 500 ETF Trust (SPY) fell 0.2%, iShares Russell 2000 ETF (IWM) dropped 1%, and the Invesco DB USD Index Bullish Fund ETF (UUP) rose 0.1%.
September 11, 2024 | 2:12 pm
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NEGATIVE IMPACT
The SPDR Gold Trust fell 0.4% as gold prices dropped in response to the inflation report and rising Treasury yields.
Gold prices often move inversely to interest rates, and the rise in Treasury yields led to a decline in GLD.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
The iShares Russell 2000 ETF fell 1% as small caps were negatively impacted by the inflation report and changing Fed rate cut expectations.
Small caps, represented by IWM, are sensitive to interest rate changes, and the reduced likelihood of a large rate cut led to a decline.
CONFIDENCE 90
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust opened 0.2% lower following the mixed August inflation report, as expectations for a 50-basis-point Fed rate cut diminished.
The lower opening of SPY reflects investor reactions to the inflation report and reduced expectations for a significant Fed rate cut.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF eased 0.1% as Treasury yields rose following the inflation report.
Rising Treasury yields typically lead to a decrease in bond prices, affecting TLT negatively.
CONFIDENCE 85
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
The Invesco DB USD Index Bullish Fund ETF rose 0.1% as the dollar gained strength following the inflation report.
The rise in UUP reflects the strengthening of the dollar, which is often influenced by inflation data and interest rate expectations.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70