Stocks Smashed After Fed Holds Rates – Nasdaq down 2.2%
US stocks were hit hard yesterday after the Fed held rates steady and Jerome Powell indicated that a March cut is off the table. The Dow closed down 0.82%, the S&P lost 1.61% and the Nasdaq was smashed, closing the day 2.23% in the red. Volatility picked up in the currency markets with the dollar initially taking a hit before recovering later in the session and US treasury yields slid, the 10-year down 8 basis points to 3.98% and the 2-year losing 8.2 basis points to drop down to 4.28%. Oil prices settled lower on the day, Brent losing 1.4%, now trading at $81.05 a barrel and WTI dropping 2.5% down to $75.75 a barrel. Gold had another whippy day, trading in a $2,030 – $2,055 range before settling around the $2,040 level.
FOMC Hits Investor Hopes
Investors hoping for imminent rate cuts in the United States were left disappointed after yesterday’s rate announcement as the FOMC left its key policy rate at 5.25%-5.50% and advised that “it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%”. Jerome Powell and co put paid to any hope of a rate cut in March which only a few weeks ago was fully priced into some markets and now investors are looking at May for the first move of the year. Stock markets were hit hard and some fear that there is more pain to come in the next few sessions. Longer-term, traders will now be paying even closer attention to data prints to confirm the move lower in inflation is continuing which will open the way for rate easing.
Another Busy day Ahead for Traders
Traders are expecting to see the aftermath of the Fed meeting volatility extend well into the APAC session today as markets digest the latest update from the worlds premier central bank. Attention in the Asian session moves to China early in the day with the latest Caixin Manufacturing PMI data due for release. On the London session open, all eyes will be firmly on the UK and the MPC’s decision on the Official Cash Rate, which they are widely expected to keep at 5.25%, once again, traders are expecting to see more volatility from the summary and press conference than from the actual rate call. The US Day has another job update, the weekly unemployment claims data as well as the ISM Manufacturing PMI numbers later in the session.
