Market Review April 8 & 9, 2024

This week's economic data so far provides a glimpse into consumer inflation expectations, bond market dynamics, and energy stock levels, each carrying implications for monetary policy, market sentiment, and energy pricing. The NY Fed's inflation expectations survey offers insights into consumer outlooks on inflation, crucial for future spending and saving decisions. Meanwhile, the bond auction results indicate investor appetite and expectations for interest rates, and the API crude oil stock levels provide key signals about supply-demand dynamics in the energy sector.

Event Overview

• NY Fed 1-Year Consumer Inflation Expectations (April 8, 2024): The inflation expectations remained stable at 3.00%, consistent with the previous measurement. This stability suggests that consumers do not foresee an acceleration in inflation, which can influence their spending behaviors and economic outlook.

• 3-Year Note Auction (April 9, 2024): The yield on the 3-year Treasury note rose significantly to 4.55% from a previous 4.26%. This increase in yield indicates a shift in investor expectations, possibly reflecting concerns about future inflation or a higher demand for risk premium due to economic uncertainty.

• API Weekly Crude Oil Stock (April 9, 2024): Crude oil stocks increased by 3.034 million barrels, exceeding the forecast of 2.415 million and reversing the previous drawdown of -2.286 million barrels. This build suggests a decrease in demand or an increase in supply, which could influence crude oil prices.

Impact Analysis

• Impact on USD:
• The rise in 3-year note yields could strengthen the USD, as higher yields often attract foreign investment in U.S. treasuries, increasing demand for the dollar.
• However, stable inflation expectations might limit upward pressure on the currency, as it suggests consumer confidence in the Fed's inflation management.

• Impact on Gold:
• Gold might see increased demand as a hedge if the rise in bond yields reflects growing concerns about inflation or future economic stability.
• The stability in consumer inflation expectations may temper this effect slightly, balancing out the potential for significant price movements.

• Impact on Equity Futures:
• Higher treasury yields could lead to a recalibration of equity valuations, potentially dampening enthusiasm for stocks as the relative attractiveness of bonds increases.
• The build-up in crude oil stocks might impact energy sector stocks, potentially leading to lower prices if the market perceives an oversupply situation.

This week’s data points highlight key trends in consumer expectations, bond market dynamics, and energy supplies that could influence various market sectors. Investors may need to consider the implications of rising bond yields and increasing oil stocks on their portfolios, especially in sectors sensitive to interest rate changes and energy prices.