Global Markets Experience Volatility Amid Shift in Rate Cut Expectations and Geopolitical Tensions
Stocks took a hit as investors reassessed the likelihood of Federal Reserve rate cuts, causing Treasury 10-year yields to surge above 4%. Meanwhile, oil prices rallied as the market awaited a potential response from Israel to a recent missile attack attributed to Iran.
The strong September jobs report has led to a shift in expectations, with many now predicting a smaller rate reduction next month. Money markets no longer anticipate a half-point cut this year, and the probability of a quarter-point reduction in November has dropped to 86%.
While some analysts believe the Fed may opt for no rate change if economic data continues to come in strong, others caution that geopolitical tensions could still drive market volatility.
In corporate news, Amazon.com Inc. fell after an analyst downgrade, while Pfizer Inc. rose on reports of a significant stake taken by activist investor Starboard Value.
Despite the market downturn, some top strategists have turned bullish, citing a robust labor market, economic resilience, and easing interest rates. Morgan Stanley’s Michael Wilson and Goldman Sachs’ David Kostin have both upgraded their views on the market, with Kostin predicting a 10% gain in the S&P 500 over the next 12 months.
The third-quarter earnings season is expected to be a key driver of market activity, with strategists at Bank of America Corp. predicting a fertile ground for active investors.
In other news, Chevron Corp. agreed to sell stakes in oil sands and shale assets to Canadian Natural Resources Ltd. for $6.5 billion, while Apollo Global Management Inc. agreed to buy Barnes Group Inc. in an all-cash transaction valued at $3.6 billion.
This week, investors will be watching for key events, including Fed speakers, minutes, and economic data releases, as well as the start of earnings season for major Wall Street banks.
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