Fed Decision Boosts US Stocks, Gold; Dow, Nasdaq Up 1%, Bond Yields Dive

On Wednesday, May 1st, the Federal Reserve, as expected, did not raise interest rates and kept the policy interest rate within the range of 5.25% to 5.50% for the sixth consecutive meeting since last July. Prior to this, some analysts believed that Federal Reserve Chairman Powell would make hawkish remarks at the press conference.

The statement also confirmed market speculation that the pace of QT balance sheet reduction would slow down starting in June, with the monthly reduction of U.S. Treasury holdings slowing to $25 billion, slightly higher than Wall Street's expectation of slowing down to $30 billion or halving from before.

After the Federal Reserve's decision was announced, the U.S. stock market gains expanded, U.S. Treasury yields and the dollar fell further, and gold rose by 1% again:

The U.S. stock market gains expanded, with the Dow Jones Industrial Average rising by more than 170 points that day, the Nasdaq Composite Index stopped falling and turned to rise, and the S&P 500 Index almost erased the intraday losses.

The two-year U.S. Treasury yield fell by nearly 6 basis points and broke below the 5% mark. The intraday drop in the 10-year benchmark bond yield deepened to more than 5 basis points to 4.63%.

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The U.S. dollar index DXY turned down again during the day to 106.10. Spot gold rose by about 1% and returned to the $2,300 mark, with a short-term rise of about $6.

Before Powell's press conference at 2:30 PM Eastern Time, the U.S. stock market turned up across the board, gold broke through $2,310, and U.S. Treasury yields and the dollar fluctuated lower:

After a slight decline, the Nasdaq Composite Index turned up again, the Dow Jones Industrial Average expanded its gains to 220 points or 0.6%, and the S&P 500 Index also turned up.

The two-year U.S. Treasury yield, after falling towards 4.97%, once returned above 5%, and then the decline expanded again by 5 basis points to 4.99%. The 10-year benchmark bond yield, after once falling below 4.62%, returned to 4.63%, also falling by 5 basis points during the day.

The U.S. dollar index once narrowed its decline, approaching the pre-decision 106.20, and then the decline stabilized at 0.1% and broke below 106.10. Spot gold held above $2,300, rising by more than 1% and breaking through $2,310.During Powell's press conference, U.S. stocks and gold prices rapidly expanded their gains, while U.S. Treasury yields and the dollar's decline deepened. Powell stated that short-term inflation expectations have risen, and gaining confidence in rate cuts is more protracted than imagined:

The Dow Jones Industrial Average rose nearly 400 points or 1%, the S&P 500's gains expanded to 0.6% and continued to hit new daily highs, and the Nasdaq Composite rose 150 points or about 1%.

The two-year U.S. Treasury yield's decline widened to 11 basis points, trading below 4.94%, losing the 5% threshold again. The 10-year benchmark bond yield fell by 10 basis points and lost the 4.60% mark.

The U.S. Dollar Index (DXY) fell by 0.4%, breaking below the 106 threshold to 105.80. Spot gold prices expanded their gains to 1.7% and broke through $2,320.

Before the announcement of the Federal Reserve's monetary policy decision, U.S. stocks generally fell, U.S. Treasury yields declined, gold rose, and the dollar erased its losses:

Among the major U.S. stock indices, only the Dow Jones Industrial Average rose, while the S&P 500 index, which is heavily weighted with large-cap stocks, and the Nasdaq Composite, which is dominated by technology stocks, both opened lower and continued to decline, with losses deepening to daily lows by midday. The S&P 500 fell as much as 0.4%, and the Nasdaq fell as much as 0.6%, both hitting new lows for over a week since April 22. The Dow Jones Industrial Average rose as much as nearly 147 points or 0.4%, moving away from the near two-week low it set yesterday.

Five minutes before the policy announcement, U.S. stocks briefly rose, with the S&P and Nasdaq losses narrowing to 0.2%. The Dow Jones Industrial Average refreshed its daily high and maintained a gain of over 120 points. The Russell 2000 small-cap index stopped falling and turned positive, erasing an earlier loss of 0.3%.

U.S. Treasury yields fell across the board, moving away from their highest levels in nearly half a year. The two-year yield, which is more sensitive to monetary policy, fell by 5 basis points and hovered around the 5% threshold, having risen above 5.04% yesterday to the highest since mid-November last year. The 10-year benchmark bond yield fell by about 6 basis points to 4.63% yesterday, having risen to 4.69%, and briefly broke above 4.73% last Thursday, the highest since early November last year.

Five minutes before the policy announcement, U.S. Treasury yields fell further, with the two-year yield falling by more than 3 basis points to 5.01%, and the 10-year benchmark bond yield falling by nearly 4 basis points to 4.64%.

The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, stopped falling and turned positive, rising back above 106.20. It had reached 106.49 during the European stock market session, hitting a two-week high since April 16. If it breaks through 106.51, it will be the highest since early November last year.The decline in U.S. Treasury yields and the initial weakness of the U.S. dollar led spot gold to break through the psychological level of $2,300, rising to $2,310 or a maximum increase of 1% at the beginning of the U.S. stock market, recovering from the four-week low since April 5, which was set by a 2% drop yesterday.

Five minutes before the decision was announced, the U.S. Dollar Index was still trading at 106.22, fluctuating between gains and losses for the day. The gains in spot gold narrowed slightly, but it continued to trade around the $2,300 level.