US Stocks Sink After Hawkish Fed – Dow Off 1.6%
US markets came under significant pressure overnight as a combination of escalating geopolitical tensions in the Middle East and a more hawkish Federal Reserve outcome drove volatility across global asset classes. All three major US equity indices closed firmly lower, with the Dow Jones falling 1.63% to 46,225, the S&P 500 declining 1.36% to 6,624, and the Nasdaq shedding 1.46% to finish at 22,152. Sentiment deteriorated as oil prices surged and investors digested a shift in the Fed’s forward guidance. While the FOMC held rates as widely expected, the tone of the update leaned more hawkish than markets had anticipated. Policymakers continued to project just one rate cut for the remainder of the year, and notably, one member raised the possibility of a further rate hike. This shift saw US Treasury yields move sharply higher, with the 2-year yield rising 10 basis points to 3.773%, while the 10-year yield climbed 6.7 basis points to 4.265%. In currency markets, the US dollar strengthened on the back of higher yields and tighter policy expectations, with the dollar index gaining 0.71% to push back towards annual highs at 100.27. Commodity markets were dominated by sharp moves in energy, with oil prices surging amid heightened tensions in the Gulf region. Brent crude jumped 7.16% to $110.79, while WTI rose 3.67% to $99.74, as the war escalated further in the Middle East. Gold, meanwhile, moved sharply lower despite the risk-off backdrop, with the stronger US dollar outweighing safe-haven demand. The precious metal fell 3.74% to $4,818.50, marking a one-month low.
Gold Sinks Again Despite Increased Conflict in the Middle East
Gold remained under pressure following the Federal Reserve’s latest policy decision, as a stronger US dollar and expectations of higher interest rates for longer weighed on prices. Despite escalating geopolitical tensions in the Middle East, including increased missile activity and attacks on regional energy infrastructure, gold failed to attract safe-haven demand. Spot gold fell 3.74% to $4,818.50 per ounce, its lowest level in over a month, while April futures settled 2.2% lower at $4,896.20. Technical support is seen just above $4,700, with resistance near the $5,000 level, but traders are expecting more volatility in the sessions ahead, with many now favouring the short side of the trade as US yields continue to power north.
Biggest Calendar Day of the Year for Traders Ahead
Looking ahead, markets are bracing for another highly active session, with the aftermath of the Fed decision continuing to ripple through markets alongside persistent geopolitical risks. Attention will also turn to a heavy slate of global central bank decisions, as well as some key tier 1 data releases. The Asian session has already seen New Zealand GDP come in under expectations, but focus will jump across the Tasman for Australian employment numbers, with change expected at +20k and the unemployment rate steady at 4.1% later in the day. After this, attention moves to Japan for the latest interest rate call from the Bank of Japan, where they are expected to keep rates on hold. The London session looks set to be one of its busiest of the year so far, with the Bank of England, Swiss National Bank, and the European Central Bank all making rate calls, and all expected to keep rates on hold. Around these major updates, we also have the key UK employment data – claimant count exp. 25.8k, unemployment rate rising to 5.3% – and the weekly US unemployment claims numbers (exp. 215k) shortly after the New York open.
