On Wednesday, Eastern Time, the highly anticipated September interest rate decision of the Federal Reserve was announced. The Fed ultimately chose a more dovish and aggressive 50 basis point rate cut. Major assets experienced significant turbulence after the Fed's September statement was released.

Before the Federal Reserve's interest rate statement was released

Wednesday afternoon, Eastern Time, past 1:50, the market was waiting for the Fed to announce the magnitude of the first easing rate cut in this round. Before the Fed's decision statement was released, the U.S. stock market was mostly steady, U.S. bond yields rose during the day, gold fell during the day, and the U.S. dollar index edged down.

The S&P 500, Dow Jones, and Nasdaq were mostly steady, while the Philadelphia Semiconductor Index dropped 0.1% and the Philadelphia Bank Index rose more than 0.1%.

The yield on the U.S. 10-year Treasury notes rose by 3.4 basis points to 3.68%. The yield on two-year U.S. Treasury notes rose by 3.7 basis points to 3.64%.

Spot gold turned lower and fell below $2570.

The ICE U.S. dollar index fell by 0.06% to 100.83.

After the Federal Reserve interest rate statement was announced,

At 2:00 PM Eastern Time, the Federal Reserve announced its September interest rate decision, revealing a 50 basis point cut.

The dot plot shows that the Federal Reserve is expected to cut rates by another 50 basis points this year, but the situation is more intense: 10 officials forecast a decrease of 100 basis points or more in 2024, while 9 officials expect a decrease of 75 basis points or less in 2024. In addition, for the first time since 2005, a member dissented from the Fed's rate cut decision, with Governor Bowman only in favor of a 25 basis point cut.

The Federal Reserve's 50 basis point rate cut led to a severe short-term reaction in the market just after 2:00 PM Eastern Time, with U.S. stocks and gold surging briefly, U.S. bond yields plunging, and the U.S. dollar weakening:

U.S. stocks surged briefly, with the S&P 500 index rising by about 1% intraday, the Dow Jones rising by around 375 points, and the Nasdaq 100 gaining over 1.1%.

The 10-year U.S. Treasury yield plunged from above 3.69% to below 3.64%, experiencing an overall intraday decline. The 2-year U.S. Treasury yield dropped from above 3.64% to below 3.54%.

Gold prices rose by around $20 in the short term, reaching $2587.57 per ounce, approaching the historic high of $2589.70 set on September 16. Spot gold continued to climb, surpassing the $2590 per ounce level, setting a new historical high, with an intraday increase of over 0.7%.

The U.S. dollar index dropped by 40 points. The British pound rose to 1.3287 against the U.S. dollar, hitting a new high since March 2022. However, about 13 minutes after the statement was released, U.S. stocks almost gave back all their gains from the initial rate announcement, the decline in bond yields also significantly narrowed, the U.S. dollar rebounded slightly from its intraday low after the rate announcement, while gold maintained its strength overall. Some analysts mentioned that the more substantial rate cut has raised doubts about the health of the U.S. economy.

Subsequently, until after the start of the Federal Reserve Chairman Powell's press conference, the trend of US stocks, US bonds, and the US dollar reversed again. During this period, the main assets continued the trend after the interest rate statement was announced, that is, US stocks, US bonds, and gold rose, while the US dollar fell.

After Powell's press conference.

After Powell's press conference started, US stocks rose; spot gold rose above $2,600, reaching a record high; ICE US Dollar Index fell more than 0.5%, hitting a daily low of 100.307 points; offshore renminbi rose above 7.07 yuan, hitting a daily high, with an increase of about 400 points during the day, an increase of more than 0.5%.

Traders increased their bets on the extent of easing. The yield on the US two-year Treasury notes, which is sensitive to monetary policy, fell by 7 basis points to 3.53% at one point. Traders bet that the Federal Reserve will cut interest rates by about 123 basis points by the end of 2024, higher than the approximately 112 basis points before the Federal Reserve's decision was announced.

During the press conference, Powell stated that no one should assume that a 50 basis point rate cut on Wednesday is a new normal speed. His personal view is that they will not return to the previous low level neutral interest rate.

During the press conference, there was a reversal in the trend of major assets:

The three major US stock indexes fluctuated greatly during the press conference. At one point, they erased all their intraday gains and turned into losses, then rebounded, but ultimately ended the day with all three major indexes closing lower, about 40 minutes after the press conference ended.

The yield on the US two-year Treasury notes remained steady around 3.6%, hitting a daily low of 3.5377% when the rate cut was announced, breaking away from the daily high of 3.6590% set during the early trading session.

Spot gold rose and fell, hitting a daily low of $2,553.50 after the press conference, well below the historical high of $2,600.16 set at the start of the press conference.

The ICE U.S. Dollar Index returned above 100.8, with the overall intraday decline narrowing to less than 0.1%. Powell hit a daily low of 100.215 at the start of the press conference.

Trends of major assets:

The chart below shows the full-day performance of the U.S. stock market:

The chart below shows the full-day performance of the 10-year U.S. Treasury bond:

The chart below shows the full-day performance of gold:

The following chart shows the full-day trend of the USD.

This article is sourced from "Wall Street News"; edited by Li Fo.