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US stocks indicated low as Fed outlook could dial back first rate cut timing

(Partial Video Transcript)

Today’s overview

Angeline Ong: Hello, I’m Angeline Ong, and this is your very special “Beat the street” here at IG, the show that gives you the tradable news and data you need ahead of the Wall Street open. Coming up, the US stocks indicated low on concerns the Fed could dial back the timing of its first rate cut. And Powell point. Watch out for comments from the Fed chair, Jerome Powell, and Federal Reserve Board Governor Michelle Bowman. And Intel’s operating losses escalate. We’ll have a look at what impact that’s having on Intel’s shares.

Now, a very good afternoon to you. I’m Angeline Ong all and welcome to this edition of “Beat the street”. Not long now before Wall Street starts trading. Just showing you the Dow Jones Industrials, especially after we’ve just had that data from the ADP National Employment for March. 148,000 was what we were looking for. It was actually stronger than expected; 184,000 was what we got. Just looking at the 15 minute chart here for you on the Dow Jones Industrials, because that will give you a better idea of the reaction there. And as you can see, it is ticking ever so slightly, just lower there. What is interesting, though, is that this comes amid rather strong data recently from the US, and perhaps we might get a further sense of whether this strength will continue.

Interview with Chris Vecchio

Let’s cross live now to Chris Vecchio in a very key week because we got non-farm payrolls on Friday as well. Chris, first off, what do you make of these numbers that we just had?

Chris Vecchio: On one hand, ADP was much better than expected, came in at 184k and that’s with the contextual background of non-farm payrolls expected to come in around 200k for this month. And so the face value is that US economic data remains strong, which, as you point out, actually has been quite good over the past two and a half weeks. The Atlanta Fed GDP now growth tracker for the first quarter, which, considering we’re in April, we should take the seriously. It’s about 2.8% now. Two weeks ago it was at 2%.

So, there has been some near-term momentum here and that set the stage for the Powell speech last Friday and ultimately his remarks today, whereby Fed officials are laying the groundwork clearly that they may not be able to cut rates in the first half of this year. That’s a very real risk, the way the commodity prices have been moving recently, if you look to say DBC, the Deutsche Bank Commodity Index Tracking Fund, it started to break out, but in a double bottom throughout the middle of March. Oil prices – yearly high. Gold prices – all-time high. Copper prices – continue to soar. Food prices are going back up.

As the Federal Reserve is telling us that they may not need to raise rates again – and ultimately the timing of the cuts, June, July, they’re coming at some point – they’re doing this in the face of rising inflation pressures. So, that’s really the issue here. Is Powell going to continue to signal that they’re willing to let price pressures run back up in the short term, even if it means no more hikes? That’s not something that the markets will necessarily like from here.

(Watch the video for the full “Beat the street” episode)

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