U.S. markets finished a volatile week mixed, caught between rising energy costs, a more hawkish Fed and renewed strength in AI stocks. The Nasdaq outperformed as semiconductor and other AI-related shares recovered from an early sell-off, while the Dow and small caps declined. Growth stocks also held up better than value. The Fed raised its policy rate by 25 basis points to 3.75%–4.00%, its first increase since 2023. The unanimous vote was more hawkish than many expected, and policymakers signaled another increase before year-end. Earlier in the week, the 10-year Treasury yield briefly reached 5.04%, its highest level since 2007, before easing after the decision. Oil added to the market’s uncertainty. Attacks on Saudi energy infrastructure initially pushed crude prices higher, while record U.S. diesel prices sharpened inflation concerns. Oil later retreated as reports suggested the pipeline damage might be less severe than feared. In credit markets, investment-grade bonds benefited from solid demand, but high-yield bonds remained under pressure from higher yields and the prospect of further rate hikes. Beyond the U.S., European equities fell as energy costs weighed on sentiment. The Bank of Japan also raised rates by 25 basis points to 1.25%, but its split vote and limited guidance on future hikes were followed by a weaker yen. Japanese equities rose over the week, helped by exporters and a recovery in AI shares. The dollar index ripped to its highest level since the start of August. Gold finished the week modestly higher testing back up to $4400. Bitcoin proved remarkably resilient, surging today up to $81,000.
Have a great weekend
Charles & Syz Research Lab