- All three major US stock indices tumbled sharply on Friday, with DOW down -3.03%, S&P 500 down -3.37%. NASDAQ down -3.94%. All closed below their 55 day EMAs.
- Trigger was Fed Chair Jerome Powell’s Jackson Hole speech. In short, Powell showed strong commitment to fight inflation, with willingness to tolerate pain in the economy, while holding interest rates high for a period of time until the job is done.
- On the back of this restrictive policy stance, The US two-year yield climbed as much as six basis points to 3.46%, the highest since November 2007. Back-end was relatively calm, 10-year yield breached above the 3.10% resistance from last week but struggling to sustain above there.
- The dollar index was up 0.5% but again this was only the reversal of the move it had heading into Jackson hole so it looks like the dollar will need more impetus for a significant break higher. Gold was down 0.6%, in line with the broad dollar led move. Only Oil managed to rebuff dollar’s overtures with 0.70% rally as supply concerns eclipsed Powell’s aggressive rate stance.
- This week will be crucial as the market tries to digest the longer term implications of Powell's hawkish stance and the moves over the next few sessions should set the tone for next month. In these uncertain times, the only certainty will be heightened volatility, especially in equities space.
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