US stocks, US bonds, and gold all fell together, what happened?

Overnight overseas markets saw a reversal, with US stocks ending their rebound and falling along with US bonds and gold, leading to a decline in Asian markets on Friday morning.

Specifically, the S&P index fell by 1% at one point, with the tech-heavy Nasdaq closing down by 1.68%, with technology stocks, chip stocks, and AI concept stocks leading the decline.

The decline in US stocks led to a drop in Asian markets in early trading, with stock index futures in Japan, Australia, and Hong Kong falling.

US bonds also ended their upward trend, with bond yields rising, the 10-year Treasury yield increasing by 5 basis points, and the more policy-sensitive two-year yield climbing by 7 basis points.

The US dollar saw its largest gain in over a month.

The reason behind this decline is that the Federal Reserve's dovish stance fell short of market expectations, leading to a reduction in rate cut expectations and disappointing US economic data, reigniting concerns about economic growth.

Ahead of Powell's speech at the Jackson Hole Symposium, Fed officials have been hinting at a rate cut, emphasizing that the pace of rate cuts should be "gradual" and "orderly," rather than as aggressive as the market expects.

Currently, market expectations for a significant rate cut by the Fed have diminished. Pricing in the swaps market shows that out of the remaining three Fed policy meetings this year, there are expected to be three 25 basis point rate cuts, whereas just two days ago the market was expecting around 100 basis points of cuts.

This shift means that swap traders no longer anticipate a 50 basis point rate cut in 2024.

Analyst Kenny Polcari from SlateStone Wealth stated:

We are not discussing whether they will cut rates now, but how much they will cut and how many times before the end of the year. The US economy is not in distress, so there is no need to imply that it is.

Meanwhile, a series of poorly performing economic data was released overnight, with initial jobless claims hovering at multi-year highs; existing home sales increasing for the first time in five months, while home prices hit historic lows, reaching new highs; the Chicago Fed's national PMI index plummeting significantly, showing the fastest contraction this year, and the manufacturing confidence survey results being dismal...

It is worth noting that there were high expectations for the Jackson Hole Symposium in the market previously, with aggressive rate cut expectations. There were warnings that Powell might find it difficult to signal a more dovish stance than the market expects, cautioning against a dollar rebound and market sell-off during the meetingIn addition, in terms of the recent trend of the US dollar, Citigroup believes that the US dollar index is currently approaching an important support level of 100.30-100.82. Coupled with weak European economic data relatively boosting the US dollar, Powell's less dovish stance than market expectations, and the possibility of a resurgence of the "Trump trade", the US dollar will be supported