October Fed hike odds collapse to ~50% after Williams speech; stocks bounce off lows into the close
What happened
New York Fed President John Williams said in an afternoon speech that there is "no need for urgency" in continuing rate hikes and that the Fed should take time to review more data, directly pushing back on the ~70% market odds of an October 28 hike. Per the CME FedWatch tool, October hike odds collapsed from 70.9% to 51.5%, and odds of a half-point of hikes through year-end fell to 42.7% from 58.7%. Stocks perked up off their lows on the remarks: the Dow closed down 131 points (-0.3%) at 51,349.92, the S&P 500 slipped 0.17% to 7,670.84, and the Nasdaq shed 0.09% to 26,797.54. The 2-year Treasury yield fell 0.035 point to 4.887%, while the 10-year still closed at 5.256%, a 19-year high, and the 30-year at 5.594%, a 24-year high.
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- S&P 500 (-0.2%), Nasdaq (-0.1%), Dow (-0.3% / -131 pts): bounced off intraday lows as hike odds fell; Nasdaq briefly turned green
- Rate-sensitive equities (utilities, REITs, homebuilders, small caps): relief as October hike becomes a coin flip; Russell 2000 outperformed
- Mega-cap tech: mixed - Apple -2.1% on BofA/Muse competitive-risk note; Nvidia slipped 0.3% after Monday's buyback pop; Meta +2.1%
- Energy: WTI -3.5% to $89.38 (lowest September settlement) on Iran back-channel talks and recovering Hormuz flows
- Treasuries: 2-year fell to 4.887% on Williams; 10-year still closed at 5.256% (highest since May 2002); 30-year at 5.594% (highest since June 2002)