The Federal Reserve signals rate cuts, leading to gains in US stocks, bonds, crude oil, gold, and the Japanese yen, as market expectations for rate cuts rise

Wallstreetcn
2024.07.31 19:51
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Traders believe that the Federal Reserve will cut interest rates by 70 basis points this year, previously expected to be 64 basis points. After Powell's rate cut statement, gold prices, US bond prices, US stocks, and the Japanese yen rose, while the US dollar fell. During Powell's speech, influenced by news from Iran, WTI crude oil rose by 5% intraday, with safe-haven assets such as gold, US bonds, Japanese yen, and Swiss franc rising, and the US stock market giving back some of its gains

On Wednesday, Eastern Time, the Federal Reserve announced its interest rate decision for July. The Fed signaled a possible rate cut in September, leading to a rise in US stocks, US bonds, crude oil, gold, and the Japanese yen, while the US dollar weakened. Traders believe that the Fed will cut rates by 70 basis points this year, compared to the previous expectation of a 64 basis point cut.

Before the Release of the Fed's Decision Statement

Minutes before the release of the Fed's decision statement, US bond prices and gold prices rose, the US dollar fell, and US stocks remained in an upward trend:

  • The yield on the 10-year US Treasury bond fell by 2.9 basis points to 4.11%. The 2/10-year US bond yield spread decreased by 3.1 basis points to -25.42 basis points.
  • The ICE US Dollar Index fell by 0.28% to 104.266 points, moving away from the daily low of 103.926 points set at 10:00 pm Beijing time on Wednesday. The Bloomberg Dollar Index fell by over 0.4%.
  • Spot gold rose by 0.7%, hitting a daily high of $2429.06 per ounce.
  • The S&P 500 index rose by 1.5%, the Dow Jones rose by 0.6%, and the Nasdaq rose by over 2.3%. The Philadelphia Semiconductor Index rose by 5.28%, the Philadelphia Bank Index fell by 0.1%, NVIDIA rose by over 10%, Tesla rose by 3.6%, and Apple rose by 1.5%.

After the Fed's Interest Rate Decision Announcement

At 2:00 pm Eastern Time, the Federal Reserve announced its July interest rate decision as expected, while signaling a possible rate cut in September. The Fed further confirmed progress in lowering inflation and began emphasizing the need to address risks in employment.

After the release of the Fed's decision statement, US bond yields slightly rose, gold prices gave back some gains, and US stocks continued to rise:

  • The yield on the 10-year US Treasury bond rose by over 2 basis points in the short term, approaching 4.13% after the Fed's interest rate decision statement. The 2-year US bond yield rose by 3 basis points in the short term, nearing 4.39%. The 2/10-year US bond yield spread briefly decreased by over 1 basis point, hitting a daily low below -27 basis points.
  • Spot gold briefly dropped by about $5, maintaining a 0.5% increase for the day.
  • The S&P 500 index rose by 1.49%, the Dow Jones rose by 0.63%, and the Nasdaq rose by 2.28%.

Remarks by Fed Chair Powell

At 2:30 pm Eastern Time on Wednesday, Federal Reserve Chair Powell held a press conference. Powell stated that the market's perception of the FOMC being closer to a rate cut is reasonable, and that the issue of a rate cut may be discussed in September.

After Powell's remarks on a rate cut, gold prices, US bond prices, US stocks, and the Japanese yen rose, while the US dollar weakened:

  • The yield on the 10-year US Treasury bond fell by over 3.3 basis points, approaching 4.1% again. The 2-year US bond yield dropped from around 4.37% to below 4.34%. The 2/10-year US bond yield spread narrowed to less than 2.25 basis points, returning above -24 basis points.
  • The ICE US Dollar Index fell by over 0.34% again, dropping below 104.20 points. The US dollar against the Japanese yen widened its decline to nearly 1.6%, nearing 150 yen.
  • Spot gold's increase expanded to over 0.8%, hitting a daily high of nearly $2432
  • The S&P 500 index rose by more than 1.9%, the Dow rose by 370 points, expanding by over 0.9%, and the Nasdaq rose by about 2.9%. The Philadelphia Semiconductor Index rose by 6.9%, the Philadelphia Bank Index turned to rise by over 0.1%, and the Russell 2000 small-cap stock index rose by 0.6%. Nvidia rose by over 13%, Tesla rose by 4.3%, and Apple rose by about 2%.

During Powell's Speech

During Powell's speech, influenced by news from Iran, WTI crude oil rose by 5% intraday to $78.48 per barrel. Safe-haven assets such as gold, US Treasuries, the Japanese yen, and the Swiss franc rose, and the US stock market gave back its gains.

Major Asset Trends

The following is the trend chart of the S&P 500 index:

The following is the trend chart of Nvidia:

The following is the trend chart of the 10-year US Treasury:

The following is the trend chart of the US Dollar Index:

The following is the trend chart of crude oil:

The following is the trend chart of gold:

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