Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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Markets received an early Christmas present on Wednesday after the Fed delivered a highly-anticipated rate cut on the dollar. While expected, the decision nevertheless prompted a sigh of relief throughout financial circles, which swiftly turned into a flurry of buying activity. US stocks reacted positively, with the Dow Jones and S&P 500 climbing to record highs yesterday, but for once, the technology sector missed out on the euphoria. Oracle (ORCL) published a worrying quarterly earnings report late on Wednesday, which led to an 11% loss on the stock the following day. The company fell short of revenue estimates projected by analysts, but the bigger problem in the eyes of many is the fact that Oracle reported capital expenditures of $12 billion in Q2. The figure is much higher than expected and has reawakened concerns regarding an over-inflated AI sector. The fall in Oracle also dragged down other AI-focused stocks, including Nvidia (NVDA), which lost 1.6% yesterday. Far from causing widespread fear across the stock market, the shift away from tech has resulted in a rotation towards other sectors, hence the outperformance of the Dow Jones and Russell 2000 indices over the past two days.
The Fed’s decision was also well received in precious metals, pushing gold to $4,279 per ounce on Thursday, while silver briefly reached above $64 during yesterday’s session. For those keeping track, silver is now up a staggering 120% since the start of the year, dwarfing decades of prior price action. In stark contrast, there has been absolutely zero reaction in cryptocurrencies thus far.
Alongside the interest rate adjustment, the Fed also committed to regular purchases of short-term treasury bills, to the sum of $40 billion per month, set to begin today. According to Jerome Powell, the buying is “solely for the purpose of maintaining an ample supply of reserves over time, thus supporting effective control of our policy rate”, meaning the move is mostly technical in nature, ensuring the Fed has enough on its balance sheet to properly control market liquidity. Although the planned purchases are not officially part of the Fed’s monetary policy, for many people, they will be perceived as such. With quantitative tightening officially over, market participants have been on the lookout for signs of asset buying; it looks like they got their wish.
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