Markets Week Ahead: Dow Jones, Nasdaq 100, Gold, US Dollar, Crude Oil, Fed, Powell

Global market volatility was on edge this past week as financial-related stocks disproportionately suffered. On Wall Street, the Dow Jones fell -0.15%, but the tech-heavy Nasdaq soared 4.41%. Across the Atlantic, the DAX 40 and FTSE 100 sank -4.28% and -5.33%, respectively. This is as Japan’s Nikkei 225 fell -2.88% while Hong Kong’s Hang Seng Index rose 1%. Regional banks were feeling the pinch of Silicon Valley Bank’s collapse earlier this month. Despite receiving a financial lifeline from larger banks, Frist Republic Bank shares collapsed over 70% over the past 5 trading sessions. Troubles at Credit Suisse further compounded bank sector woes as a few major banks were reported curbing trading with the lender or are considering it. As a result, traders were quick and aggressive at the pricing in rate cuts from the Federal Reserve. Compared to March 10th, markets priced in a full 100 basis points in cuts looking 6 months out. That would leave the Federal Funds Rate around 4.25% after anticipating hikes to 5.25% beforehand. The 2-year Treasury yield tumbled.

In Response, The US Dollar Turned Lower.

as markets focused on a dovish Fed. Anti-fiat gold soared and is up about 8.9% this month. We have not seen this kind of performance since July 2020 during the Covid pandemic as central banks rushed to cut rates around the world. Meanwhile, the price of WTI crude oil collapsed 13.55% last week, the most since February 2020. Ahead, all eyes will be planted on the Federal Reserve on Wednesday. All bets of a 50-basis point hike have vanished, with there being rising expectations of an end to the tightening cycle. But, slightly over 50% of expectations favor a 25bps increase. Either way, this is opening the door to a surprise either way if the odds get closer to 50-50. The Bank of England will also be setting rates. What else is in store for markets in the week ahead?

Leave a Reply