First, some comments from Fed officials, specifically Mester and Daly, who once again focused on the need to combat inflation. Both stressed that inflation is still far from easing, according to the latest figures published. Moreover, they downplayed the latest GDP data, ruling out the possibility of a deep recession in the economy. Therefore, it was interpreted from their words that they would be more in favor of an aggressive rise, 75 bps, than of lowering the intensity of rate hikes. US Treasury bond yields reacted upwards along the entire curve. The 2-year note, the most sensitive to Fed interest rate hikes, rose from 2.86% to 3.07%, a significant gain for this short-end bond.
These Fed officials seem not to consider the performance of most commodities that have experienced deep falls, and the data published the previous day. The ISM manufacturing price index plummeted to the 60-level – a sign that could anticipate declines in the CPI in the coming months. In any case, the Fed's decision is made collegially, and they are just two of the voting members.
On the other hand, the event that kept the market on edge for much of the session was the visit of the Speaker of the House of Representatives, Nancy Pelosi, to Taiwan. Direct threats from China against this visit made fears for the worst, and the market was contained with a slight downward trend awaiting news about this trip. In the end, everything seemed to have gone well, but the tension and fear of retaliation from China caused a certain change in market sentiment towards greater risk aversion.
As a result of all the above, the Wall Street indices could not recover and ended the session with slight losses.
Today's most relevant event for the market is the OPEC meeting. In principle, no notable change is expected in its production levels that could affect the price of crude oil. Still, there have been talks in the market of a possible tacit agreement between the United States, Saudi Arabia, and the Gulf countries to boost production and help mitigate the global energy crisis.
It is just a rumor, but if confirmed, it would be a surprise for the market that would drag down the price of crude oil. From a technical point of view, it is around a major support zone at $94.70. Below this zone, the downside target would be around $85.
Sources: Bloomberg, Reuters