The VIX is approaching 18 at the time of writing after a stronger than expected rebound in the ISM Services with a marked rebound in the “Prices paid” component of this activity index. It is worth remembering that services represent the largest part of activity in the United States, and that the inflation the Fed still struggles with lies mainly…in services.
The price component of the ISM Services, which rebounds to its highest level since February 2023 (64.4 vs 58.2 the previous month), is not good news for the Federal Reserve and its president Jerome Powell who had already warned, in December, that a continued slowdown in inflation towards the target was the necessary condition for further rate cuts. Knowing that core PCE inflation, in annual data, has not made further progress towards the objective for two quarters…
The rebound in the number of available jobs (JOLTS figure) will also push the Fed to be patient because it removes possible fears linked to the job market, the Fed’s other mandate.
These figures led to a continued rebound in American long rates, with the 10-year reaching 4.69%, its highest level since the beginning of May. Since the Fed began its rate cut cycle in September, the US 10-year rate has rebounded by…100 basis points.
The bearish reaction of American indices following the publication of these figures shows that the “good news is bad news” feeling has made a comeback and that the market “prefers” to worry about the absence of further rate cuts rather than to salute the good figures.
From a technical point of view, the Nasdaq100 index, which had been rebounding for several days, has just been pushed back below the oblique line passing through the December highs. If the current correction brings the index back to contact with 21,000 points, the decline could accelerate with a break from the bottom of the consolidation triangle formed in December, and whose technical objective is located in the area of 19,500 points.
Swiss
