Here’s What’s Happening in Markets Today: April 09

Markets reversed earlier gains and are now declining midmorning Tuesday’s as investors hold their breath and await the March consumer price index (CPI) report, which will indicate if inflation continues to cool. 

All 3 major indices switched direction, impacting corresponding ETFs. SPY, the SPDR S&P 500 ETF Trust lost 0.5%, while QQQ, the Invesco QQQ Trust, slid 0.4%. QQQ often mirrors the tech-heavy Nasdaq’s performance due to their huge tech exposure.

The much awaited inflation gauge is set to be released at 8:30 AM on Wednesday and is expected to rise .3% from the previous month, according to economists polled by the Dow Jones. 

Bond ETFs, which are highly sensitive to interest rates, climbed Tuesday morning. TLT, the iShares 20+ Year Treasury Bond ETF, jumped nearly 1% early in the trading session as bond yields sank. Bond ETFs have been under pressure all year as investors have been concerned about rate cuts in the current “higher for longer” environment.

The CPI report may impact bond ETFs further on Wednesday; a hotter than anticipated report would make investors believe rate cuts won’t be on the table for a long time (if at all), causing yields to sink. If the CPI report comes in lower than expected or in line with forecasts, yields could retreat even further. Yields and prices have an inverse relationship, so when yields drop, prices rise. 

TLT YTD Total Returns

Currently, markets are forecasting a 56% chance that the Fed will cut rates at its June policy meeting, according to the CME Fed Watch Tool.

Gold prices hit fresh highs on Tuesday as investors look for a safe haven amid concerns over rates. As commodity prices surge this year, those holding commodity ETFs in their portfolio have been able to take advantage of the big gains. GLD, the SPDR Gold Trust, spiked more than half a percentage point, while the ETF is up over 12.5% this year so far. 

GLD 1-Year Performance

Gold prices have been propelled by rate cut expectations. Gold prices tend to move in the opposite direction of interest rates. When interest rates drop, gold prices rise as investors look for a better return than fixed income can offer, whose yields drop when interest rates fall. 

Questions still remain however if gold’s rally will continue in the long run.