Dow Jones hits all time high, bond prices fall

Although the Dow Jones was only barely up overnight, it nevertheless reached a new all-time high. The rally appears to be a continuation of yesterday’s rally following the more dovish than expected comments from Fed Chair Janet Yellen in her testimony to the House Financial Services Committee.

Volatility on the ASX remains relatively high with a 1%+ move yesterday although over the past month the index hasn’t made any real ground. With the market’s focus off the banks (for the time being), investors will be looking for a new catalyst to provide direction. The Aussie dollar is close to a one year high as the reduced outlook for rate hikes in the US provides a bullish catalyst. 

After a brief rally, bond prices fell again overnight, bringing yields back up near the highs for this move. With the US federal budget balance released last night showing a much larger deficit than expected, and with the Federal reserve talking about starting to let its bond portfolio run off, there should be strong upward pressure on yields in the coming months which may eventually lead to increased borrowing costs for consumers.

Tonight the US releases its CPI data which is expected to show that inflation is still below the Fed’s 2% target. A weak CPI reading could be enough for the Fed to double down on its recent dovish commentary as low inflation is one of the main areas of concern for the Fed. Retail sales data will also be released, which will provide insight to the level of consumer spending.    

Data releases:

US monthly CPI                   10:30

US Core CPI                        10:30

US   Core Retail Sales         10:30

US Retail Sales                    10:30

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

This article was written by William O'Loughlin - Local Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via or by phoning +612 8302 3633.

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