US Tech Stocks Rally Ahead of Fed Decision – Nasdaq Jumps 1.18%
US stock markets pushed higher again in trading yesterday, with technology stocks leading the charge as investors positioned themselves ahead of key earnings updates and a massive day for central banks. Hopes of further progress towards a peace deal in the Middle East also helped boost sentiment, while traders continued to factor in a widely anticipated rate hold from the Federal Reserve. The Nasdaq led the gains, jumping 1.18% to close at 26,477, while the S&P 500 climbed 0.60% to finish at 7,722. The Dow Jones was relatively quiet, edging just 0.03% higher to close at 52,377, as technology stocks continued to outperform the broader market.
US Treasury yields edged higher again ahead of the conclusion of the FOMC meeting, with the policy-sensitive 2-year yield gaining 2.3 basis points to close at 4.737%, while the benchmark 10-year yield rose 0.8 basis points to finish at 4.997%, just below the key 5% level. The US dollar also continued to gain ground against the major currencies, with the Dollar Index climbing 0.34% to close at 102.37.
Oil markets experienced another volatile session yesterday, with both major contracts falling as fresh developments in the Middle East raised hopes of progress towards a potential peace deal. News that the parties involved had agreed to continue negotiations helped ease some of the immediate supply concerns that have driven prices sharply higher in recent weeks. Brent crude dropped 1.43% to close at $114.15, while WTI fell 1.83% to finish just below the key $100 level at $99.90. Despite the latest pullback, prices remain elevated, and traders are expecting further sharp moves in the coming sessions as geopolitical headlines continue to dominate sentiment.
Gold managed to recover further ground after its recent heavy losses, climbing 1.03% to close at $4,057.80. The precious metal has found some support around recent lows and pushed back above the key $4,000 level, although the combination of a stronger US dollar and elevated Treasury yields continues to present challenges for the bulls.
Euro and Gold at Pivotal Levels Ahead of the Fed
The dollar is in focus for the FX market today, with the Fed due to deliver its latest interest rate call, and traders will be paying particular attention to both the Euro and Gold levels as the day progresses. Both are sitting very close to annual lows against the USD, and any hawkish indications from either the FOMC in the rate statement or Kevin Warsh in the press conference, or both, could send both products tumbling in short order.
The Euro came under further pressure yesterday and is now trading very close to its annual lows, while Gold is in a similar position despite a rally in the latter sessions overnight. Any dollar rally after the FOMC will see the Euro hit fresh annual lows, with 1.1000 the next major target, while Gold could also drop, with the annual low at $3,942.99 the initial target. A break through those lows could see a swift move to stronger support on the daily chart, down around the $3,850.00 level.
Huge Trading Day Ahead for Markets
Looking ahead, it is shaping up to be an extremely busy day for global markets, with a packed economic calendar featuring interest rate decisions from three major central banks. The Asian session kicks off with Australian CPI data (exp. +0.7% m/m, +4.2% y/y) early in the session, followed by the Reserve Bank of New Zealand’s interest rate decision just 30 minutes later, where the bank is expected to deliver a 25-basis-point hike. The press conference is scheduled an hour later. The European session will see attention turn to the UK Annual Budget release shortly after the open, which could generate significant volatility in sterling and UK markets.
The US session will be even busier, with the Bank of Canada announcing its latest interest rate decision early in the day—another 25-basis-point hike is expected—followed by its press conference. However, the main event for global markets will undoubtedly be the Federal Reserve’s interest rate announcement, due out a few hours before the close, followed by the press conference. Markets are overwhelmingly expecting the Fed to leave rates unchanged, meaning the biggest moves are likely to come from the accompanying statement and forward guidance on the prospect of another hike in December.
With interest rate expectations, corporate earnings and geopolitical developments all competing for traders’ attention, markets look set for another highly volatile 24 hours. The Fed will be the main focus, but any significant developments in Middle East peace negotiations could quickly shift sentiment, particularly in oil, gold and currency markets. Traders should be prepared for sharp moves across multiple asset classes as the day progresses.
