Market Overview
Global markets responded to the US Federal Reserve’s decision to maintain interest rates, a move largely anticipated by traders. Wall Street concluded its third consecutive day of gains, buoyed primarily by technology stocks, especially chipmakers, amid a renewed interest in the artificial intelligence (AI) trade. However, inflation concerns persist, fueled by earlier oil price increases and a subsequent rise in Treasury yields. Looking ahead to the APAC session, Australian futures are indicating a positive start for the region.
The Federal Reserve kept its target range for interest rates steady at 3.75% to 4%. Fed Chairman Kevin Warsh noted that inflation remained “too high,” reiterating the central bank’s commitment to “price stability.” He also acknowledged that the employment picture had been “quite positive,” that financial conditions had “tightened somewhat” since the September rate decision, and that the FOMC discussion focused mainly on the inflation side, with more discerning market participants present. Warsh also noted that crucial economic data, including Q3 US gross domestic product (GDP) data and the September reading on the personal consumption expenditures (PCE) price index, were scheduled for release on Thursday, and that this information would be crucial for determining future policy. Despite the pause, traders are pricing in a rate hike at the Fed’s next meeting in December.
Markets
US equities ended higher on Wednesday, with the S&P 500 (^GSPC) advancing 0.28% to 7,743.98. The Nasdaq Composite (^IXIC) gained 0.27% to 26,549.85, and the Dow Jones Industrial Average (^DJI) rose 0.19% to 52,475.10.
In commodity markets, Brent Crude (BZ=F) futures closed down 3.27% at 110.16, though oil prices had gained earlier in the session. WTI Crude (CL=F), however, finished higher, adding 1.69% to 101.59. US Treasury yields rose, with the 10-year Treasury (^TNX) climbing 5.20 basis points to 5.045%, and the 30-year Treasury (^TYX) yield up 5.60 basis points to 5.361%. The Australian dollar (AUDUSD=X) strengthened against the greenback, closing up 0.50% at 0.7055.
European markets also closed in positive territory, with London’s FTSE 100 (^FTSE) up 0.07% to 10,694.50, and Germany’s DAX (^GDAXI) ending the day 0.44% higher at 25,704.02.
For the upcoming APAC session, ASX 200 futures were up 0.3 per cent, or 22 points, to 8882 near 6am Sydney time, suggesting a positive open for Australian shares. In their most recently completed session, South Korean memory chipmaker SK Hynix (000660.KS) saw its shares jump 10.89% to 1,487,000.00 won, while Samsung Electronics (005930.KS) closed up 9.01% at 242,000.00 won.
What Drove Markets
The Federal Reserve’s anticipated decision to pause rate hikes provided some immediate relief to markets, but Chairman Warsh’s firm stance on high inflation and the ongoing expectation of a December rate hike maintained a cautious outlook for future monetary policy.
The artificial intelligence sector experienced a notable rebound, particularly among chipmakers. This surge was primarily driven by strong earnings from South Korean giant SK Hynix, which posted a record quarterly profit and projected tight memory markets until at least 2030, fueled by AI demand. However, concerns about the financing durability of AI infrastructure persist, highlighted by Meta Platforms’ recent negative free cash flow due to nearly $35 billion in AI-related capital expenditures, and AI lab Anthropic’s over $600 billion in compute and infrastructure agreements.
Earlier gains in oil prices, despite Brent crude futures closing lower for the day and WTI crude finishing higher, reignited inflation concerns, contributing to the rise in US Treasury yields. Geopolitical tensions in the Middle East also intensified, with Iran-backed Houthis attacking the Ras Tanura refinery in Saudi Arabia. In Europe, London stocks climbed after Chancellor John Healey delivered a low-key budget, with Gilts advancing and contributing to perceptions of the UK as a haven compared to major eurozone economies.
Stocks to Watch
- Oracle (ORCL) shares jumped 10.73% after the company provided a strong fiscal 2030 revenue outlook, showcasing strength in the enterprise software sector.
- Chipmakers rallied, reflecting the broader AI trade rebound. SK Hynix (000660.KS) surged 10.89% and Samsung Electronics (005930.KS) climbed 9.01% in their previous completed sessions on robust demand. Other notable gainers included Micron Technology (MU), up 5.86%, Arm Holdings (ARM), which advanced 4.10%, Marvell Technology (MRVL), gaining 3.32%, and Advanced Micro Devices (AMD), up 3.24%. Applied Materials (AMAT) also saw a gain of 5.07%.
- Among the “Magnificent Seven” tech giants, Alphabet (GOOGL) rose 1.34%, while Microsoft (MSFT) saw a marginal decline of 0.06% and Meta Platforms (META) fell 1.24%. Apple (AAPL) declined 0.94% despite recent product news.
- Financial heavyweights like JPMorgan (JPM) (+1.05%) and Goldman Sachs (GS) (+1.47%) also advanced, contributing to the broader market uplift.
- Beyond these, the upcoming earnings reports from Alphabet and Microsoft, along with others, are anticipated to provide crucial insights into AI expenditures.