Stocks Edged Higher Amid Rising Yields

STATE OF THE MARKETS

Stocks edged higher amid rising yields. US stocks closed in the green on Wednesday after reports of easing PPI that spurred late bids. The tech-laden Nasdaq (+0.74%) led the gains, followed by Russell (+0.38%), S&P (+0.34%) and the Dow (+0.10%) as bonds were sold off, sending yields higher. The 2Y yields reached 3.80% while the 1Y pierced 3.95%, a 15-year high, as mortgage rates reached 6% for the first time since 2008. The Dollar index stalled at 109.60 mark waiting for the next catalyst as the 10Y benchmark pinned to 3.40%

In the commodity markets, crude received a boost higher as EIA expects an increase in gas-to-oil switching due to higher prices in the coming winter. The black gold settled around $88.50/bl as New York closed. Gold was under pressure as investors expected a more aggressive Federal Reserve and the metal fall to test $1,680/oz in early North American trading. Elsewhere, iron ore tumbled back to $100.40/tn on demand concerns amid global slowdown.

In the FX space, sentiments turned bearish as Swiss, Yen and Dollar led the demand in the short and medium term while the comdoll trios were sent to offers. Long term was relatively unchanged.

On Thursday, markets expect to remain cautious as FedWatch now is almost certain for a 75 bps hike next week with a 23% chance of a full 1% hike. Earnings calendar is thin with only Adobe Inc (ADBE) while investors watch the latest US jobless claims, manufacturing index, retail sales and import/export prices to further gauge inflation.

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OUR PICK – No New Pick

We stay on the sideline. With two losses in a row as EUR/AUD and crude oil stopped out, we decided to stay put until next week.

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