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 william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.