Despite Brent crude oil prices soaring to a four-year high of $103.42 per barrel, the Nasdaq Composite Index rose by 0.5% on Tuesday, demonstrating the resilience of tech stocks amidst the energy crisis impact. The S&P 500 Index and the Dow Jones Index recorded gains of 0.2% and 0.1%, respectively. According to Bloomberg data, the energy sector emerged as the strongest performing segment within the S&P 500 Index, offsetting some of the pressure from inflation expectations on growth assets.
Market Reaction
On the eve of the Federal Reserve meeting outcome, Wall Street's mood was complex. Although crude oil supply was limited due to the Middle East situation and the Strait of Hormuz blockade, oil futures experienced a roughly 3% pullback in early trading on Wednesday, providing some respite for risk assets. The rise in the Nasdaq Index reflects market confidence in the cash flow capabilities of tech giants, as investors attempt to find a balance between inflation risks driven by energy prices and the structural growth of tech stocks.
Policy Outlook
The market's current focus has completely shifted to the Federal Reserve. According to swap market pricing, traders have significantly lowered this year's ease expectations due to the persistent geopolitical premium. Data shows the probability of no rate cuts throughout 2026 has surged from 4% before the war to 45%. Powell's statements before the end of his term will be crucial, as the market closely watches whether he will formally acknowledge that war-driven inflation will lead to higher interest rates being maintained for a longer duration.
