Dovish Fed Spurs Markets to Fresh Highs – Nasdaq up 1.25%
A dovish conclusion to the latest Federal Reserve meeting helped spur US indices to new record highs on Wall Street yesterday. The Fed kept rates on hold as predicted but indicated that they would still be cutting three times this year which helped to erase investor fears after recent sticky inflation data. The Dow closed up 1.03%, the S&P up 0.89% to hit a new record high close at 5,224.62 and the Nasdaq added another 1.25%. Both the dollar and US treasury yields dropped after the meeting, the Dxy losing 0.34% on the day, 2-year yields lost 5.6 basis points to trade down to 4.621% and the benchmark 10-year slipped 2 basis points, closing the session at 4.277%. Oil also lost some ground, with demand concerns outweighing a lower dollar, Brent dropping 1.64% and WTI falling 2.14%. Gold fully embraced the lower dollar, jumping 1.2% on the day to trade around the $2,183 level by the New York close.
FOMC Shrugs off Inflation Concerns
Investors were pleasantly surprised with the Federal Reserve’s reaction to recent higher inflation points as they kept their dot plot on target for 3 interest rate cuts this year. There had been concerns that recent CPI, PPI, and PCE Index numbers would push the FOMC to put out a slightly more cautious statement, but they maintained their stance from the previous meeting advising that the road to lower inflation will be “sometimes bumpy”. Investors took the update as a green light for more stock market growth and pushed the S&P to another record high whilst the dollar took a bit of a bath against most of the majors. Traders will now move back to data-watching with the next updates on inflation likely to see stronger moves in the market.
Another Busy Thursday for Traders Ahead
Traders will get little chance to take a breather today as they must digest the latest update from the Fed as well as deal with a plethora of fresh data hits and the small matter of another 2 major central bank updates. The action has already kicked off in the APAC session with Kiwi GDP numbers coming in below expected and focus will swiftly jump across the Tasman to Australia where the latest key employment numbers are due out. There are Flash PMI numbers out in all sessions today, with Australia, the EU, the UK, France, Germany, and the US all set for releases. Those data prints are, however, likely to be overshadowed by rate calls from both the Swiss National Bank and the Bank of England during the European trading session. The New York session also has more data inputs for Wall Street to take on board with the release of the usual weekly unemployment claims numbers as well as the Existing Homes Sales data release.
