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<\/figure>\n\n\n\nEquities are jogging toward the 4300 level on the S&P 500 Index, erasing most of yesterday\u2019s losses. While the tech sector was hardest hit yesterday, it\u2019s making some progress today with the Nasdaq Composite Index up 0.8% while the S&P 500 Index is up 0.4% to 4283. Bond yields are lower on lighter data from the U.S. and the eurozone, with the 2- and 10-year Treasury maturities down 5 basis points (bps) each to 4.5% and 3.73%. Lighter Fed expectations have pulled down the Dollar Index, its down 64 bps to 103.44 against the backdrop of 71% odds of a pause at next week\u2019s Fed meeting. WTI crude oil is down 72 bps to $72.03, as the demand outlook continues to weigh on the commodity. <\/p>\n\n\n\n
While Canada and a large portion of the U.S. are struggling under the smoke from wildfires, the economic impact of the record-setting fires remain uncertain. As of yesterday, Canada woodlands comparable to twice the size of New Jersey were scorched and more than 400 wildfires continued to burn. Canada is a major wood exporter and the fires contributed to lumbers’ price rising from $434 in May to $507 today. With U.S. housing highly unaffordable and construction in a slump, it remains to be seen if lumber price increases will persist, but the fires are having other impacts. A handful of gold, lithium, iron, copper and nickel operations have been shut down along with rail service in areas where fires exist. The fires have also weakened production of natural gas and oil. In May, Canada produced an average of 18 billion cubic feet of natural gas a day (BCF\/d). That number is estimated to have declined to 17.7 BCF\/d as of yesterday, according to S&P Global, while oil operations have also been curtailed. For May alone, the wildfires are estimated to have trimmed 0.1% to 0.3% of the country\u2019s monthly real GDP.<\/p>\n\n\n\n
Looking ahead to next week\u2019s Fed meeting, Chairman Jerome Powell may surprise market participants with another 25-bp hike. As 500 bps of hikes have been implemented thus far, job growth and consumer spending continue to move at a brisk pace while labor vacancies remain near record highs. The Consumer Price Index (CPI) is scheduled the day before Powell takes the mound and it\u2019ll be interesting to wonder if it moves the needle for the next day\u2019s press conference. While headline CPI is going to come in low relative to recent memory, the core figures that the Fed cares about most are flatlining, warranting continued monetary policy restraint. A failure to do so will result in a renewed surge in inflationary pressures fueled by a loosening in financial conditions.<\/p>\n\n\n\n