The Market Is Not Afraid Of Inflation
S&P 500 futures are gaining some ground in premarket trading as traders remain confident that the Fed keeps inflation under control.
Yesterday, U.S. reported that Inflation Rate increased by 5% year-over-year in May compared to analyst consensus of 4.7%. The report did not put any pressure on the stock market as analysts pointed out that the surge in prices of used trucks and cars played a crucial role in pushing inflation above previous estimates.
Bond traders remained confident in Fed’s ability to control inflation, and the yield of 10-year Treasuries declined below 1.44% before moving back above 1.45%. A week ago, the yields of 10-year Treasuries were close to 1.60%, so market sentiment changed materially in recent trading sessions.
WTI Oil Gets Back Above The $70 Level
Yesterday, WTI oil dipped below the $69 level after U.S. announced that it removed sanctions on several former Iranian officials. The move was unrelated to current talks about Iran nuclear deal, but traders (and algorithms) reacted to the headlines.
The market quickly learned that the move had no relation to nuclear talks, and oil moved back to the $70 level. At this point, traders remain focused on the robust rebound of the U.S. economy and increased demand during the summer driving season.
The recent EIA Weekly Petroleum Status Report indicated that crude inventories declined by 5.2 million barrels, which served as an additional positive catalyst for oil. Interestingly, gasoline inventories increased by 7 million barrels, but they remained at the five-year average for this time of the year.
U.S. Dollar Tries To Gain Upside Momentum
Lower Treasury yields did not put pressure on the U.S. dollar. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, received support at the 90 level and moved above the 20 EMA at 90.20.
It looks that precious metals traders are puzzled by recent moves in Treasuries and U.S. dollar, as gold remains stuck in a tight range below the psychologically important resistance level at $1900. If gold manages to get above this level, it will gain additional upside momentum which will be bullish for gold mining stocks.
For a look at all of today’s economic events, check out our economic calendar.