Market recap: the last 24 hours in U.S. macro and markets

U.S. markets spent the past day in a holding pattern as investors positioned for today’s August Consumer Price Index release and a heavy dose of Treasury supply. With the Federal Reserve in its pre-meeting blackout period, price action was driven mostly by data anticipation, auction dynamics, and cross-asset hedging rather than fresh policy guidance.

Equities

Major U.S. equity benchmarks traded in relatively narrow ranges, with intraday rallies and dips largely failing to extend as traders avoided outsized bets ahead of CPI. Leadership rotated through defensives and quality growth, while cyclicals were broadly sensitive to moves in rates and energy. Market breadth was mixed and volatility gauges remained contained, consistent with a wait-and-see stance into key macro catalysts.

Rates and Fed expectations

Treasury yields held near recent levels across the curve as investors weighed inflation prospects against supply. The week’s refunding has kept term premium in focus, with the 10-year benchmark steady in the middle of its recent month-long range and curve shape little changed. Fed funds futures pricing for the next two Federal Open Market Committee meetings was broadly stable, reflecting a market that sees upcoming data as pivotal to calibrating the pace and size of potential policy easing into year-end.

U.S. dollar and foreign exchange

The dollar index was broadly steady against major peers, mirroring the subdued rates backdrop. FX pairs most sensitive to U.S. yield differentials stayed range-bound, while commodity-linked currencies took their cues from choppy energy prices. Traders reported light positioning adjustments rather than directional conviction moves.

Commodities

Oil prices consolidated after recent swings, with Wednesday’s weekly U.S. inventory signals met by offsetting demand and macro concerns. Refining margins and gasoline trends remain in seasonal focus as summer demand fades. Gold hovered in a tight band, with real-yield stability tempering haven flows ahead of CPI.

Credit markets

Investment-grade primary issuance remained orderly around macro events, with syndicate desks pacing supply to avoid CPI and the long-bond auction. Secondary spreads were little changed in both IG and high yield, aided by subdued equity volatility and the lack of idiosyncratic shocks. Liquidity conditions were described as adequate but thinner into the data print.

Derivatives and positioning

Options markets priced a modest volatility uptick around the inflation release, but overall implieds stayed below stress levels seen earlier in the year. Dealers’ gamma positioning continued to encourage mean-reversion intraday, contributing to capped index swings. In rates, payer skew and short-dated optionality reflected hedging against an upside inflation surprise while leaving room for duration demand if inflation moderates.

Macro developments in focus

Data and drivers

  • Inflation: August CPI today is the key catalyst, with attention split between core services stickiness and goods disinflation durability. Shelter components, health insurance adjustments, and auto-related categories remain focal points for assessing underlying trend.
  • Labor: Initial jobless claims arrive alongside CPI, offering an updated read on labor-market cooling. While weekly noise is common, sustained shifts tend to feed quickly into rate-cut odds.
  • Treasury supply: The week’s refunding cycle culminates with the long bond auction today. Auction outcomes can nudge term premia and curve shape, especially when landing near major data.
  • Housing and credit: Midweek mortgage application figures underscored sensitivity to rate moves; housing activity remains an important channel for policy transmission into the real economy.

Policy backdrop

With the Fed in blackout ahead of next week’s policy decision, markets are relying on the inflation and growth data to infer near-term policy. The balance of risks centers on whether inflation is gliding toward target quickly enough to justify a more confident easing path, versus lingering services inflation and tightness in some labor-market pockets arguing for a more measured cadence. Fiscal dynamics and Treasury’s financing needs continue to interact with rates through term-premium channels.

Seven-day outlook: catalysts, scenarios, and what matters

Key events and calendar highlights

  • Today: August CPI; weekly initial jobless claims; 30-year U.S. Treasury bond auction.
  • Friday: Producer Price Index; preliminary University of Michigan Consumer Sentiment and inflation expectations.
  • Early next week: Industrial Production and Capacity Utilization; regional manufacturing surveys; business inventories.
  • Midweek: August Retail Sales and related control-group components that feed GDP tracking; housing indicators (starts/permits) in focus for construction momentum.
  • Fed: Policy decision, statement, and updated projections due midweek; blackout remains in place until then.

Market scenarios around CPI and PPI

  • Cooler-than-expected inflation: Likely softens front-end yields and supports risk assets, with duration bids potentially flattening the curve. Dollar could ease, while gold and long-duration equities may catch a bid.
  • In-line outcomes: Favours range trading and puts more emphasis on the long-bond auction, Retail Sales, and the Fed’s projections for direction. Cross-asset correlations likely remain contained.
  • Hotter-than-expected prints: Could push policy-rate cut expectations further out, lifting front-end yields and pressuring high-multiple equities. The dollar may firm, and curve re-steepening risk rises if term premium increases into supply.

What to watch across assets

  • Rates: 2s–10s curve shape, auction tails/cover ratios/indirect demand, and moves in breakeven inflation versus real yields.
  • Equities: Leadership between defensives and cyclicals; breadth and small-cap relative performance as proxies for domestic growth sentiment.
  • FX: Dollar reaction to any shift in U.S. rate differentials; sensitivity in EUR/USD and USD/JPY; commodity FX versus oil.
  • Credit: IG and HY spread drift against primary supply; any sign of funding stress in short-term markets.
  • Volatility: Equity and rates implieds into and out of CPI; whether post-event selling of vol caps realized moves.

Risks and swing factors

  • Services inflation stickiness, especially in shelter and core services ex-housing, prolonging the last mile toward 2%.
  • Consumer resilience: Retail Sales control-group strength or weakness feeding directly into GDP tracking and earnings expectations.
  • Supply dynamics: Treasury issuance and dealer balance-sheet capacity influencing term premium and curve behavior.
  • Global spillovers: Energy price volatility, geopolitical risk premia, and any growth surprises from major trading partners.

Bottom line

The past 24 hours were defined by patience and positioning rather than decisive moves, with liquidity and volatility constrained ahead of pivotal data and supply. Over the next week, inflation, growth prints, and the Fed’s policy signals will set the tone for the path of rates, the dollar, and risk assets into quarter-end. Traders are primed for outcomes that challenge the prevailing “soft-landing with gradual easing” narrative—on either side—making the next few sessions consequential for trend direction and cross-asset leadership.