US Stocks, Bitcoin, and Gold Drop as Fed Plays Coy on Rates — Investors in Limbo

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The leading trio of U.S. stock indices — Dow Jones Industrial Average, Nasdaq Composite, and the S&P 500 — experienced a downturn on Wednesday afternoon. This decline coincided with a rise in 10-year Treasury yields, which jumped 0.98% to 4.102%. Concurrently, gold’s value decreased by a percentage point and bitcoin also witnessed a decline, dropping 1.02% in relation to the U.S. dollar.

Treasury Yields Surge, Dow, Nasdaq, and S&P 500 Tumble

Market sentiment remains wary regarding the U.S. Federal Reserve’s strategies for 2024, with anticipation growing around a potential rate cut by March. This outlook comes in the wake of remarks made by Federal Reserve Governor Christopher Waller during an address at the Brookings Institution in Washington. Waller acknowledged the possibility of a rate reduction occurring within the year, yet emphasized that the Fed is not in a hurry to initiate this change.

“I see no reason to move as quickly or cut as rapidly as in the past,” Waller said.

In a predictable turn of events, 10-year Treasury yields saw a 0.98% increase on Wednesday, following a 4.4% rise over the past month. As of Jan. 17, 2024, the long-term note has reached a level of 4.106%. Simultaneously, the 2-year Treasury yields experienced a significant jump of 3.08%, although they remain 2.16% lower compared to the previous month’s figures. Currently, the market is leaning towards a 97.4% likelihood that the U.S. central bank will opt for a rate hike in its upcoming meeting scheduled for Jan. 31, 2024.

The CME Fedwatch tool indicates a 52% probability that the central bank will reduce the federal funds rate by March 2024. Presently, an ounce of fine gold is valued at $2,006 per unit, experiencing a 1.09% decline in the last day. Over the past month, gold’s value has dropped by 0.66%, but it has gained 1.86% in the last six months. On Jan. 17, bitcoin (BTC) witnessed a 1.02% fall, and over the past week, the leading crypto has declined by more than 7%. Nevertheless, six-month statistics reveal a 43% increase in BTC’s value, surpassing gold’s market performance during the same period.

Although bitcoin displayed a subdued performance on Wednesday, the global market capitalization of the crypto economy climbed by 0.49%, reaching $1.69 trillion. The Dow Jones Industrial Average experienced a modest decline of 0.25% on the same day, while the Nasdaq Composite recorded a decrease of 0.59% at market close. Additionally, the S&P 500 lost 0.56%, and the Russell 2000 (RUT) ended the day with a 0.73% drop. As usual, financial markets are experiencing a period of cautious sentiment, particularly in relation to the Fed’s monetary policy direction for 2024.

What do you think about the current state of markets? Share your thoughts and opinions about this subject in the comments section below.