Markets Weekly Recap

Markets Weekly Recap

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Key Takeaways

• Wall Street surprised by the hawkish tone of the Federal Reserve
• Equities struggle to the upside, US dollar rallies, gold tumbles as markets digest Fed statement

A volatile week went by that brought to the markets one key event, a statement by the Federal Reserve that the interest rate will be lifted sooner than planned. Market participants were preparing to hear Fed Chairman Jay Powell speak on Wednesday and on that note, Monday and Tuesday accommodated quiet trading in the financial markets, from stocks to commodities to currencies.

The result of a two-day meeting between Federal Reserve officials jolted financial markets as everywhere across traditional assets, investors rushed to adjust their portfolios. The US central bank announced it is planning to lift the short-term interest rate in 2023, a year earlier than previously expected. In addition, the Federal Reserve upgraded its inflation forecast for the fourth quarter to 3.4%, up from a March prediction of 2.4%.

The immediate reaction in the markets was a sharp sell-off in equities as investors rushed into the US dollar. The Dow Jones Industrial Average slid over 250 points on Wednesday as value stocks were hurt the most. The S&P500 and the Nasdaq Composite also ended in the red.

Depreciation for Cryptos

Against the backdrop of a strong greenback, commodities erased weeks of gains. Gold tumbled to a six-week low and ended the session on Thursday with a weekly loss of 5.5%. Crude oil declined by roughly 0.50% and reached $74.12 per barrel.

On Thursday, the Dow Jones Industrial Average extended its Wednesday losses and slid another 210 points, while the S&P500 was modestly lower and the Nasdaq Composite eked out a mild gain. Friday was marked by a relative calmness in the equity markets as investors took time to digest the news.

Major currencies, however, extended their losses against the US dollar as the rally in the greenback shifted gears. The EUR/USD slipped under the 1.2000 mark, while the GBP/USD dropped below the 1.4000 milestones. The USD/CAD and the USD/CHF rallied by over 1% each.

On the cryptocurrency front, the digital currency market depreciated in the wake of the Federal Reserve update. Bitcoin remained subdued below the $40,000 area as crypto traders couldn’t provide enough buying power to push the asset higher.