NEW YORK/LONDON :Stock indexes dipped on Monday, while the U.S. dollar index hit its highest in more than two years, after last week’s blowout U.S. jobs data prompted investors to weigh the possibility that the Federal Reserve may have finished cutting interest rates.
U.S. Treasury 10-year yields touched a 14-month high.
Investors are anxiously awaiting Wednesday’s U.S. Consumer Price Index reading. Any upside surprises could underscore the view that the Fed may be done with rate cuts for now. A Reuters poll of economists gives a median forecast for an annual rise of 2.9 per cent, up from November’s 2.7 per cent, and for a monthly increase of 0.3 per cent.
U.S. producer prices data is due on Tuesday.
The December employment report on Friday showed 256,000 workers were added to nonfarm payrolls – well above expectations for a rise of 160,000 and the biggest increase since March.
Investors also worry whether inflation could pick up as a result of the policies on tariffs, migration and taxes of U.S. President-elect Donald Trump’s incoming administration.
As of Monday, the U.S. rate futures market was pricing in just 27 basis points of easing this year, or one rate cut, most likely, either in September or October, according to LSEG estimates.
“It’ll be touch and go for the next couple of days until we get the inflation news out of the way,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“The Fed has become more hawkish at this time,” and investors are considering the possibility that the U.S. may have seen the end of rate cuts, Cardillo added.
The next Fed policy meeting is scheduled for Jan. 28-29.
The benchmark 10-year yield rose to 4.799 per cent, the highest since November 2023, and was last up at 4.796 per cent.
U.S. stocks were mixed, with the benchmark S&P 500 and Nasdaq lower as bond yields surged. The Dow was higher.
The Dow Jones Industrial Average rose 327.13 points, or 0.78 per cent, to 42,267.13, the S&P 500 rose 3.51 points, or 0.06 per cent, to 5,830.71 and the Nasdaq Composite fell 112.53 points, or 0.58 per cent, to 19,050.53.
The fourth-quarter U.S. earnings reporting season also gets under way this week with results expected from some of the biggest U.S. banks including JPMorgan Chase.
MSCI’s gauge of stocks across the globe fell 2.50 points, or 0.30 per cent, to 831.36. The STOXX 600 index fell 0.55 per cent.
“We have a lot of uncertainty coming into play,” including the potential policy changes under Trump, said Adam Sarhan, chief executive of 50 Park Investments in New York.
The dollar index, which measures the greenback against a basket of currencies, was up 0.21 per cent at 109.9. It rose to its highest in more than two years on Monday, peaking at 110.17, adding to the recent rally.
The euro was down 0.34 per cent at $1.0209. Against the Japanese yen, the dollar strengthened 0.01 per cent to 157.72.
A jump in energy prices added to investor unease over inflation, as Brent futures rose above $80 a barrel to their highest level in more than four months amid wider U.S. sanctions on Russian oil. U.S. natural gas futures hit two-year highs.
U.S. crude rose $2.25 to settle at $78.82 a barrel and Brent rose to $1.25 to settle at $81.01.
With the dollar gaining, gold fell 0.9 per cent to $2,664.49 per ounce. Gold generally struggles to compete for investor cash in a high-yield, high-dollar environment.
