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Highlights
- Dow narrowly ends its longest losing streak since 1974.
- S&P 500 and Nasdaq face slight declines amidst cautious sentiment.
- Oil prices and Treasury yields exert additional pressure on equities.
The Dow Jones Industrial Average barely snapped its longest losing streak since the 1970s, closing with a modest gain of 15.37 points to settle at 42,342.24. The streak, which has rattled markets, ended even as broader indices like the S&P 500 and Nasdaq recorded slight losses of 0.09% and 0.1%, respectively. Market sentiment remained muted as investors digested the Federal Reserve's revised outlook on interest rate cuts.
The Federal Reserve recently reduced its expectations for future rate cuts, forecasting only two reductions for 2025, a shift from the previously anticipated four. The news introduced volatility to the markets, initially causing the Dow to plunge over 1,100 points mid-week. Bond yields also reacted, with US 10-year Treasury yields climbing to 4.57%, their second consecutive daily increase. The rise in yields added further pressure on equities, reflecting ongoing concerns about tightening monetary policy and its impact on economic growth.
Oil markets faced challenges as prices dipped nearly 1%, closing just below US$70 per barrel. A strengthening US dollar and concerns over Chinese oil demand have dampened market confidence. Notably, China's largest refiner warned that petrol demand in the country may have already peaked, signaling potential shifts in global energy consumption patterns.
Across the Atlantic, the Bank of England maintained its cautious stance, pausing its own rate cuts due to persistent inflation and rising wage pressures. This decision mirrors similar themes of economic caution observed globally, as central banks weigh inflation risks against growth challenges.
On the currency front, the Australian dollar was trading at 62.4 US cents, 60.2 Euro cents, and 98.19 Japanese yen during early trade. Currency fluctuations continue to influence market trends, highlighting the interconnectedness of global financial systems.
Australian markets are anticipated to mirror Wall Street’s cautious tone, with sentiment skewing towards risk aversion. The Federal Reserve's cautious approach to rate cuts for 2025 has set the stage for uncertainty, keeping investors watchful of future economic developments.
Companies such as Xero and Fortescue Metals Group could face ripple effects from these global market dynamics. As markets adjust to shifting monetary policies and external pressures, equities will likely reflect the broader economic sentiment in the coming days.
