US Markets Drift Lower After Fed – S&P Down 0.2%
US stock markets experienced a choppy trading day yesterday as investors digested the latest rate update from the Fed, with all three major indices ultimately drifting lower. The Dow closed the day just 0.03% lower, while the S&P and Nasdaq fell slightly more, closing down 0.22% and 0.33%, respectively. US Treasury yields also drifted, with the 2-year yield down 0.9 basis points to 3.963% and the benchmark 10-year losing 0.6 basis points to close at 4.237%.
FX markets were livelier as more central bank decisions hit the markets, with the dollar pushing higher on the day—the DXY up 0.35% to 103.79. Oil prices also surged as military action intensified in both Ukraine and the Middle East, with Brent up 2.07% to $72.26 a barrel and WTI up 1.73% to $68.07. Meanwhile, gold experienced a quiet day but remained near recent record levels, dropping just 0.05% to close at $3,044.40.
Central Banks Largely in Line with Expectations
Investors had been looking to this week for some clarity on the markets, with key central bank updates due. However, many were left disappointed, as most announcements went largely in line with expectations. The Fed, the Bank of Japan, and the Bank of England all kept rates on hold as expected, acknowledged inflation concerns, and recognised the threat of tariffs to global trade and the uncertainty they create.
The SNB cut rates and acknowledged its own low inflation issues, but overall, traders received little in the way of certainty regarding the banks’ future direction. As a result, economic data will take centre stage over the next few months, as markets assess whether tariffs and other geopolitical factors impact figures as strongly as anticipated. In the short term, it appears to be ‘more of the same’, with volatility likely to remain high.
Quieter Calendar Day to End a Busy Trading Week
The macroeconomic calendar is more subdued today, closing out what has been a busy trading week from both a fundamental and geopolitical perspective. The Asian session will initially focus on Japanese markets, which return after a holiday yesterday, with the National Core CPI data (expected at 2.9%) due early in the day.
There is little on the European session calendar to move markets, although Euro traders will keep an eye on the EU Current Account number mid-morning. The New York open will see an early focus on Canadian Retail Sales numbers, with expectations of a 0.1% decrease in the headline data and a 0.4% decrease in the Core data. Beyond that, traders anticipate smoother trading conditions heading into the weekend—barring any major headlines hitting the newswires!
