Global markets saw only small changes on Wednesday as investors weighed higher-than-expected US inflation, Strait of Hormuz talks and Nvidia’s earnings. These factors made investors cautious, leading to limited movement in stocks, bonds and oil prices. MSCI’s world stock index rose 0.45 points, or 0.04%, to 1,150.06. Wall Street closed slightly lower, and oil prices settled down after a volatile trading session.
Latest data out of the U.S. showed inflation stayed above the Federal Reserve’s 2% target in July, marking 65 straight months above that line. Americans spent a bit less, but personal incomes kept rising faster than inflation. This raised questions about where U.S. interest rates go next. Still, most investors did not seem to think this data would push the Fed to make any major moves at their September meeting.
U.S. Stocks Slip as Inflation Keeps Markets Uneasy
U.S. stocks finished slightly lower as investors reacted to that inflation data and waited for Nvidia’s results. The Dow Jones fell 113.52 points, or 0.21%, to 53,463.88. The S&P 500 declined 1.58 points, or 0.02%, to 7,675.70. The Nasdaq lost 21.10 points, or 0.08%, to close at 26,130.20. James Ragan, co-chief investment officer at D.A. Davidson said the market was probably due for a minor pullback. He said recent economic data did not point to any big acceleration, so a Fed rate change in September looked unlikely.
Nvidia’s second quarter earnings and outlook were another major focus. Investors weren’t just watching the numbers, they wanted to hear how this huge spending boom in AI is actually getting paid for. Europe did not see much action either. The STOXX 600 index declined just 0.01%, almost unchanged. Meanwhile, MSCI’s global equities index managed to end up just 0.04%.
Oil and Strait of Hormuz Talks Remain in Focus
Energy markets remained volatile as focus stayed on negotiations between Iran and Oman over the Strait of Hormuz, a key route for global energy. An Iranian source said both countries were still working on the details of an agreement. Earlier, Iran’s Revolutionary Guards claimed a deal was already in place on sharing the waterway and its revenues. Still, a Revolutionary Guards spokesman insisted that the strait would not open unless the U.S. met Tehran’s conditions.
U.S. crude settled down by 13 cents, or 0.16%, to $82.23 a barrel. Brent crude dropped 74 cents, or 0.84%, to $87.84 a barrel. Traders were also assessing smaller than expected U.S. crude inventory growth. Moves in oil prices seemed to influence the bonds too. Investors tracked Middle East headlines along with U.S. plans to expand government bond buybacks.
Dollar Firms as Fed Hold Odds Rise to 64%
Treasury yields increased right after the inflation release. The 10-year yield rose 0.8 basis points to 4.647%. The 30-year fell 0.6 basis points to 5.168%. The two-year rose 0.7 basis points to 4.211%.
The 2 year yield closely tracks where markets think Fed policy is heading. CME Group’s FedWatch Tool put the odds of a September hold at about 64%, up from 60.4%, with the chance of a 25-basis-point hike falling to 36%. Most traders still expect a rise before year end.
The dollar also strengthened following the economic data. The dollar index rose 0.24% to 99.15. The euro declined 0.18% to $1.1653, and the dollar gained 0.12% against the yen, now at 159.35. Gold moved in the opposite direction, reaching its highest level since mid May. Spot gold dropped 1.32% to $4,595.33 an ounce, and U.S. gold futures lost 0.65% to $4,607.80 an ounce.
