US stocks tumbled sharply overnight, together with bond yields as markets saw Fed’s dovish turn as being not dovish enough. Dollar also rebounded. At least, Fed isn’t pausing yet after yesterday’s rate hike. In particular, Fed maintained in the statement that “some further gradual increases” in federal funds rate will be consistent with sustaining the expansion and keeping inflation near target. Fed Chair Jerome Powell, while admitting that global growth is “softening”, also said “policy does not need to be accommodative” as the US economy continues to perform well.
After initial recovery, DOW resumed recent decline and hit as low as 23162.64 before closing at 23323.66, down -1.49%. S&P 500 dropped -1.54% while NASDAQ dropped -2.17%. As long as 24057.34 resistance holds, the medium term corrective fall from 26951.81 will extend to 38.2% of 15450.56 (2016 low) to 26951.81 (2018 high) at 22558.33 before completion.
US treasury yields tumbled sharply, specially at the long end. 10-year yield dropped -0.047 to 2.778. 30-year yield dropped -0.064 to 3.015, and it’s now risking 3% handle. More importantly, yield curve flattened further and it’s now inverted from 1-year (2.648) to 5-year (2.622).
Dollar is so far mixed for the week, up versus commodity currencies by down against others.
