Iran rejects U.S. war proposal, says no talks before conditions met
After 3 days of gains, stocks were headed higher again pre-market and then got hit with 2 bits of inflation data, which took the wind out of the sails. WTI crude oil moved above $98/bbl from $91.50 on reports of attacks on Iranian gas fields, making it clear the fighting is far from over. Brent crude jumped from just over $100/bbl to $109. This took interest rates, which had been falling for 3 days, back up sharply. The US 10-year moved from 4.17% to 4.23%, the 2yr from 3.65% to 3.72%.
Next, we got PPI for February. It was forecasted to drop from January’s +0.5% to +0.3% and came in at +0.7%. Core PPI was expected to fall from +0.8% to +0.3% and came in at +0.5%. These numbers were challenging and were before the spike in oil currently taking place. Investors can’t realistically expect a Fed cut anytime soon under the current situation.
Stocks have moved down broadly, with only the energy sector in the green this morning. The VIX was as low as 21.4 before oil prices jumped and the PPI data came out, then moved above 23.8 and remains above 23.
The higher interest rates have taken a bite out of precious metals, with gold down 2.8% to $4,870, silver down 3.7% to $77, and copper down 3.2%. Crypto is down over 3% with Bitcoin at $71.9K.
The volatility will likely continue as long as the energy markets are high and unpredictable. Later today, we get the Fed decision, expected to be no change in the Fed Funds rate, but more importantly, we get Jerome Powell’s viewpoints about the situation in Iran and the trends in inflation.