Good morning, Wednesday, October 11th continues the positive momentum in the stock markets. The day ended on a positive note yesterday, Tuesday, with the main indices, including the Dow Jones, Nasdaq, and S&P, gaining around half a percentage point. Purchases are primarily due to the decline in Treasury yields, as there is a close relationship between bonds and the stock market, especially in this market phase.
In particular, the purchases of Treasury bonds have been driven by investors seeking safe assets, especially in light of increasing geopolitical tensions from the Middle East. Therefore, the yield on the 10-year Treasury note, which retraced, is now below 4.60% after reaching 16-year highs last week, exceeding 4.80%. Even the 2-year bond yield has dropped, now below 5%. This has generated purchases in the stock market.
This morning, the futures are looking almost flat or slightly positive, with the Nasdaq slightly positive. As for the oil market, it remains stable at $86 per barrel after substantial gains in recent sessions. The euro-dollar, after appreciating yesterday, is now stable, nearly unchanged.
In other important news of the day, the International Monetary Fund (IMF) has revised its forecasts for the US economy upward for 2023, with a growth rate of 2.1%. In 2024, a growth rate of 1.5% is expected. Both revisions are upward, as the previous forecast in July predicted a growth rate of 1.8% for this year and only 1.0% for the next. For the eurozone, the IMF’s revisions are negative, with a growth rate of 0.7% expected for 2023, down from the 0.9% predicted in July. In 2024, a growth rate of 1.2% is expected, compared to the previous forecast of 1.5%.
Regarding economic data, the Producer Price Index (PPI) is crucial. In August, it increased by 0.7%, with goods rising by 2% and services seeing a more limited increase of 0.2%. Analysts’ expectations for September are around 0.3% monthly growth. This is a significant data point closely watched by investors as it can influence the Federal Reserve’s monetary policy decisions.
Investors’ hope is that the data will come in slightly below expectations, especially for those with investments in the US stock market, as a lower-than-expected PPI can be seen as positive by the markets.
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