Fed Cuts by 50 Points – Nasdaq Down by 0.3%
US markets experienced a volatile trading day, with the majority of products ultimately closing around familiar levels after the Federal Reserve cut interest rates by 50 basis points. Stock markets initially reacted positively to the cut but later reversed course following the press conference. By the close of trading, the Dow had dropped 0.25%, the S&P 500 declined by 0.29%, and the Nasdaq finished 0.31% lower.
There were significant moves in both rates and foreign exchange as well, with the dollar ending the day slightly higher, while yields rebounded after recent losses. The 2-year yield added 3.8 basis points, reaching 3.629%, and the 10-year yield gained 6.6 basis points to trade back up to 3.708%. Oil prices also dipped, with Brent down by 0.1% to $73.65 and WTI declining by 0.3% to $70.91. Gold saw a volatile session, surging to a new record high of $2,599.92 before crashing later in trading to close 0.7% lower at $2,552 per ounce.
Fed Opts for 50, but Markets Remain Unimpressed
The Federal Reserve delivered what some investors were hoping for, initiating their easing cycle with a 50-basis point cut. However, markets ended the day on a disappointing note, with all three major US indices closing lower. The initial reaction was positive, but as Chairman Jerome Powell updated the market during his press conference, cautioning that this move does not necessarily signal further large cuts, markets began to pull back. This, combined with the dot plot indicating only another 50 points of cuts expected by year-end—below market expectations—led to the choppy trading conditions. Investors will now be closely monitoring the market’s reaction over the coming days and scrutinising upcoming data to see if it will push the Fed off its current course.
No Respite for Traders – Another Big Day Ahead
There will be no respite for traders today as they have little time to digest the FOMC’s first rate cut in four years before facing a packed event calendar. Early in the day, New Zealand’s Quarterly GDP figures came in slightly better than expected, and attention now shifts to the Australian Employment numbers. The highlight of the day will come during the London session, with the Bank of England expected to hold the Official Bank Rate at 5%. However, sterling traders are bracing for volatility around the event. The US session is also expected to be lively, following yesterday’s Fed move, with key data releases including the weekly unemployment claims, the Philly Fed Manufacturing Index, and Existing Home Sales figures.
