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Fed Rate Hike Looms: Wall Street Trembles
16 Sep
Summary
- US Fed expected to raise rates by 25 basis points.
- 10-year Treasury yields hit highest level in 19 years.
- Oil prices remain elevated, Brent crude above $107.
Wall Street experienced a downturn on Tuesday, September 15, as benchmark indices registered losses. The Dow Jones closed down 330 points, falling over 500 points at its lowest. The S&P 500 declined 0.5%, and the Nasdaq saw a 0.8% drop, with some AI-related stocks providing minor support.
The yield on the US 10-year Treasury reached an intraday high of 5.041%, a level not seen since 2007, before settling around the 5% mark. This rise is attributed to concerns over potential oil supply disruptions stemming from the ongoing West Asia conflict.
Brent crude maintained its position above $107 a barrel. Reports indicate Saudi Arabia has informed some European customers of cancelled crude cargoes for end-September delivery due to the closure of the East-West pipeline, with no clear timeline for resuming normal operations.
The US Federal Reserve is under intense scrutiny, with the CME FedWatch tool indicating a 94% probability of a 25 basis point rate increase. Investors are also awaiting commentary from Fed Chair Kevin Warsh regarding future monetary policy. Analysts suggest that a failure to hike rates or a dovish hike could challenge the Fed's credibility and its inflation-fighting narrative. A recent Bank of America survey highlighted a disorderly rise in bond yields as a significant market risk for one-third of fund managers.
