US Stocks Crash as Rate Cut Expectations Pull Back – Nasdaq Down 1.2%
All three major US stock indices saw significant declines yesterday as investors adjusted to the prospect of a smaller-than-expected 25-basis point rate cut from the Federal Reserve in November. The Dow Jones dropped 0.94%, the S&P 500 fell 0.96%, and the tech-heavy Nasdaq slid by 1.18% by the close of trading. The US dollar consolidated at its recent highs, while treasury yields pushed higher. The 2-year yield rose by 7.4 basis points to 4.006%, and the benchmark 10-year yield climbed by 3.9 basis points to 4.019%. Oil prices surged once again amid escalating tensions in the Middle East, with Brent and WTI both gaining 3.7% to close at $80.93 and $77.14 respectively, while gold remained within its typical trading range, ending the day down 0.2% at $2,648.43.
Dollar Gains Momentum at Highs
The “buy dollars, wear diamonds” mantra has made a comeback as the US dollar enjoys renewed strength, driven by several key factors. Last week was heavy on US economic data, most of which came in stronger than expected, culminating in Friday’s impressive non-farm payroll (NFP) report. Additionally, with geopolitical risks mounting, the dollar’s status as a safe-haven currency is adding to its appeal. Major US treasury yields have now climbed back above the 4% level, and FX traders are looking for opportunities to buy dollars in anticipation of further gains as the greenback catches up with these surging yields.
Quiet Trading Day Ahead
The macroeconomic calendar is relatively light again today, though volatility is expected to continue across various asset classes, particularly oil, as the Middle East conflict continues to escalate daily. During the Asian session, the focus will be on the Australian markets, with the Reserve Bank of Australia’s Monetary Policy Meeting Minutes set for release. The RBA is one of the few central banks to maintain a hawkish stance amid the current global climate, and traders will be watching closely for any signs of a shift towards a more dovish approach. For the other major trading sessions, the calendar remains sparse, though we will hear from a few Federal Open Market Committee (FOMC) members later in the day when New York trading begins.
