Ah, dear readers, let us delve into the rather tumultuous day that unfolded in the financial markets on account of Federal Reserve Chair Jerome Powell’s remarks, which turned out to be unexpectedly hawkish.
Contents
Powell’s Hawkish Remarks
In a speech delivered to a gathering of Dallas business leaders, Powell expounded upon the impressive robustness of the U.S. economy. He posited that the Fed need not rush to lower rates, resonating confidence yet caution. Indeed, the focus remains steadfast on attaining a 2% inflation target.
Powell elaborated on the notable productivity gains, which have been "grown faster over the past five years than at any point in the two decades preceding the pandemic." This positions the U.S. economy as "the best-performing among major economies."
Market Reactions
Predictably, his comments sent tremors through the markets. The major U.S. equity indices did stumble, closing in the red, whilst the dollar flourished for a fifth straight session—truly an interesting day to witness.
- S&P 500: A decline of 0.6%, thus erasing last week’s rate cut gains.
- Energy Sector: Managed a slight increase of 0.4%.
- Industrials and Health Care: Both sectors waned by 0.7%.
Top Performers and Laggards
Despite the general decline, a few stocks did shine. Tapestry Inc. TPR rose by an eye-catching 12.8%, accompanied by Wynn Resorts Ltd. WYNN and First Solar Inc. FSLR, gaining 8.7% and 7.2%, respectively. On the flip side, Leidos Holdings Inc. LDOS and Super Micro Computer Inc. SMCI dipped rather disappointingly, at 13.6% and 11.4%, respectively.
Interest Rate Path Reevaluation
With that, traders quickly reassessed the interest-rate trajectory. The likelihood of a 25-basis-point cut in December diminished considerably. The CME FedWatch tool now tells us the odds settled at 58%, a drop from approximately 80% earlier.
Dollar and Commodity Markets
The dollar persisted on its upward trajectory, as evidenced by the Invesco DB USD Index Bullish Fund ETF UUP, reaching new heights since late October 2023.
Similarly, commodity markets did not escape unscathed. Treasury yields rose with the 10-year yield closing at 4.46%. Meanwhile, gold, tracked by the SPDR Gold Trust GLD, recorded a fifth straight loss.
Cryptocurrency Update
Turning our gaze to the world of cryptocurrencies, Bitcoin BTC/USD faltered, sliding by 1.7% over the preceding 24 hours, resting at $88,013 at 5:21 p.m. ET. It appears to be having its most challenging day of November.
For those keen to delve deeper into financial machinations, do peruse this insightful piece on Federal Reserve policies. And as we embrace these fiscal fluctuations, remember that markets are like London’s weather, ever so unpredictable.
Image conjured with the remarkable assistance of artificial intelligence via Midjourney.
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