The Federal Open Market Committee (FOMC) decided to keep interest rates at the range of 4.25% to 4.50% during its meeting yesterday, a decision that most analysts had anticipated. However, the more significant aspect was the “dot plot” projections, which indicated a possibility of two rate cuts this year. Additionally, in his press conference, Federal Reserve Chairman Jerome Powell mentioned that the Fed is committed to bringing inflation down to its 2% target. He also noted that surveys show that tariffs contribute to rising inflation expectations. Powell mentioned that inflation has begun to rise, seemingly due to tariffs, but emphasized that economic data remains strong, and while the likelihood of a recession has increased, it is not at elevated levels. He also added that the Fed is in a position where it can either lower or maintain interest rates.
How did the “dot plot” projections and Jerome Powell’s remarks affect financial markets?
U.S. stock market indices closed higher, with the S&P 500, Nasdaq 100, and Dow Jones rising by about 1%. Gold prices also surged, reaching a new record high of $3,052. Bitcoin prices rose, reaching nearly $87,000, marking the highest level since March 9, 2025.
What about U.S. Treasury bonds?
Yields on both short-term and long-term U.S. Treasury bonds decreased. The 2-year Treasury yield fell to 3.97%, and the 10-year Treasury yield dropped to 4.24%. Notably, the inversion of the U.S. Treasury yield curve between the 3-month and 10-year bonds remains, indicating the potential for the U.S. to enter an economic recession.
It seems that technical indicators may put pressure on the S&P 500 index in the near term for several reasons:
- Bearish Cross: A bearish crossover occurred between the 20-day moving average (gray) at 5,787 and the 50-day moving average (blue) at 5,928 on March 7, 2025.
- Relative Strength Index (RSI): The RSI is currently at approximately 42 points, indicating bearish momentum for the S&P 500.
- MACD Indicator: The blue MACD line is below the orange signal line and in negative territory, signaling negative momentum for the S&P 500 index.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
