US Stocks Surge After Fed – Nasdaq Up 2.9%
As anticipated, financial markets experienced significant volatility yesterday, with investors reacting to a rate hike from the Bank of Japan, a dovish Federal Reserve, a slew of tier 1 data updates, and turmoil in the Middle East. US stocks rallied later in the day following the Fed’s confirmation of impending rate cuts, which most investors now expect in September. Technology stocks led the charge, buoyed by strong earnings from Meta. The Nasdaq finished up 2.88%, the S&P 500 rose 1.95%, and the Dow added 0.95%. US Treasury yields fell, with the 2-year yield dropping 1.1 basis points to 4.348% and the 10-year yield decreasing 3.2 basis points to 4.109%. The dollar weakened, particularly against the Yen after the BOJ rate hike. Oil and gold prices soared following the assassination of a Hamas leader in the Middle East, with Brent up 2.66%, WTI up 4.26%, and gold up 0.94% by the New York close.
USD/JPY Hit with Perfect Storm After Central Bank Double Play
The USD/JPY is now trading more than 3% below its peak from yesterday’s session after being impacted by a double play from the central banks. The Bank of Japan initiated the move by raising rates by 15 basis points early in the day. Despite a somewhat conservative approach to bond purchasing easing, which initially caused a brief rally, the pair subsequently moved lower. Later in the day, the Federal Reserve added to the market’s woes. Although there was no unexpected rate cut from the FOMC, Jerome Powell’s indication of forthcoming rate cuts has led most market participants to anticipate a reduction in September. The market is now trading below 149.00, and any rallies are expected to face significant resistance as the fundamentals suggest further downside.
Another Volatile Day Ahead for Traders
Traders are bracing for another volatile day as they digest the fresh updates from yesterday. Early movements in the Asian session have already supported this expectation. The event calendar for the Asian markets is relatively quiet, with no major events scheduled. However, attention will shift to the UK markets once Europe opens, with the Bank of England’s rate decision anticipated to cause considerable movement in the pound. Later, the New York session will see more tier 1 data from the US, including weekly unemployment claims and the ISM Manufacturing PMI. Earnings reports from major US companies, such as Apple and Amazon, will also be closely watched.
