Monday concluded with a downturn on Wall Street, signaling a year-end note of caution due to both international and domestic pressures as well as the prospect of interest rate cuts by the Federal Reserve.
The mood of uncertainty carried forward into Tuesday as investors contemplated the end of last year’s high performance. The futures market only accounted for two quarter-point cuts throughout 2022, indicating a decreased probability of aggressive rate cuts.
In the first week of the new year, Wall Street’s performance fell short of expectations despite a promising jobs report. Stock futures further dipped with the S&P500 reducing close to 1% in the previous week. Tech shares also struggled and the Dow Jones Industrial Average showed poor results, decreasing about 0.2%.
European markets followed a similar downward trend while Asian markets displayed mixed results.
Anticipating Fed cuts amid market volatility
Global policy discussions in the European Central Bank and Bank of Canada, and the release of the Federal Reserve’s meeting minutes are eagerly anticipated by investors worldwide.
The Federal Reserve’s easing policy adds to market volatility, potentially offering a buffer in the erratic market tendencies. Rate futures suggest a movement towards approximately 150 basis points of easing for the entire cycle.
The U.S. dollar remained resilient on Monday despite potential Japanese government interference. Scheduled speeches from Austan Goolsbee of the Federal Reserve Bank of Chicago and Neel Kashkari of the Federal Reserve Bank of Minneapolis could provide insights into future economic policies.
Oil prices jumped last week due to increased demand, supply disruptions, and geopolitical instability. In contrast, Chinese stocks and U.S. crude prices fell, reflecting the unpredictable nature of global financial markets and worldwide economic factors.
U.S. Treasury Secretary Janet Yellen issued a warning to China regarding potential damages to new sectors by its imports. U.S. President Joe Biden pledged not to allow a repeat of the 2000’s ‘China Shock’, which led to a significant decrease in U.S. manufacturing jobs due to a surge in Chinese imports.
