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More Fed fears are fueling increased volatility

Fed char Powell keeps traders on the edge as rates might be hiked more rapidly again. Next stop, NFP data on Friday.

Traders are searching for direction before key data

Tuesday, when speaking before the United States Senate, Fed Chair Jerome Powell left the door wide open for a 50 bps rate increase at the next conference. Powell stated that the Fed is willing to quicken the pace of rate rises if the evidence warrants it. 

The S&P 500 continued its fall on Wednesday, however most of the indexes recovered. The S&P 500 closed almost 6 points in the green which is 0.15%, with Nasdaq hitting a green 0.4%. Dow Jones is the only one declining among the big three with 0.18% in the red.

NASDAQ

NASDAQ 1D chart, source: tradingview.com

Friday’s NFP (nonfarm payrolls) report for February might still influence the Fed’s decision over whether to resume a faster rate of rate rises. A rise in semiconductor equities, driven by an increase of more than 4% in Advanced Micro Devices (AMD), kept the technology sector above the zero line, ultimately lifting the stocks.

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Tesla fell 2% just after US National Highway Traffic Safety Agency opened an investigation into two complaints regarding the Tesla Model Y steering wheel coming off. After yesterday’s jump, Bond rates continued to rise, with the 2-year Bond return nearly reaching 5.1%, the maximum level since 2007.

US dollar found its ceiling

The Fed talks prompted a surge in the US Dollar, resulting in the US Dollar Index (DXY) hitting its top point since early November, at 106.00. With the late turnaround, the dollar index closed flat with only a 0.04% in the green. EUR/USD managed to stay unchanged with the slight rebound towards the end of the session.

The Canadian dollar weakened on Wednesday to a near five-month low against its US counterpart, as the Bank of Canada paused its tightening campaign in a move that contrasted with the Federal Reserve’s shift this week to a more hawkish message.

As a result, USD/CAD closed 0.34% in the green. USD/JPY managed to stay above the 137 mark with a slight increase of 0.12%.

Oil continues to the red

In its weekly petroleum status report, the Energy Information Administration (EIA) stated that US crude stocks decreased by 1.69 million barrels last week. This is the first weekly decline since December following 10 consecutive weeks of builds that added over 60M barrels.

WTI, finished at $76.66 a barrel, down 92 cents, or 1.2%. This is after Tuesday’s 3.6% decline. The two-day decline followed Monday’s first finish over $80 for WTI in three weeks.

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Brent crude closed at $82.66 a barrel, down 0.8%. The benchmark for global crude sank 3.4% in the prior session. Similar to WTI, Brent’s decline followed a three-week high settlement price of over $86 on Monday.

In other news, silver futures for May delivery are barely holding on to the $20 mark at $20.108 with a 0.45% decline. Gold futures’ April contract ended up 0.1% lower amid Treasury yields being stronger each day. 

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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