Despite Falling Oil Prices, There's Now a 73% Chance of an Interest Rate Hike by September -- Here Are the 2 Culprits to Blame
Yahoo Finance ·
Although the Dow Jones Industrial Average ( ^DJI +0.02% ) , S&P 500 ( ^GSPC +0.38% ) , and Nasdaq Composite ( ^IXIC +0.90% ) have all notched record-closing highs since early June, trouble is brewing on Wall Street. In May, trailing 12-month U.S. inflation surged to a three-year high of 4.2%, spurred by the inflationary effects of the Iran war. While the stock market has thus far been able to climb this wall of worry, the probability of the Federal Reserve raising interest rates has risen sharply. Fed Chair Kevin Warsh delivering remarks. Image source: Official Federal Reserve Photo. On June 12, there was just a 26% chance that the Fed would hike the federal funds target rate by the Federal Open Market Committee's (FOMC) Sept. 16 meeting. As of July 12, this probability has risen to 73%, according to the CME Group 's FedWatch Tool. On the surface, this probably doesn't make much sense . West Texas Intermediate crude oil has plummeted from an Iran-war high of nearly $118 per barrel on April 7 to $74 per barrel in the late evening of July 12. With energy commodities driving inflation higher in the first place, the expectation would be for lower crude oil prices to drag down inflation and ease rate-hike concerns.
AI 시장 분석
U.S. consumer price inflation rose to 4.2% in May, reaching a three-year high and fueling inflation concerns. According to the CME FedWatch Tool, the probability of a September rate hike surged from 26% in June to 73% in July. Despite falling oil prices, the increased likelihood of rate hikes is expected to heighten market volatility.
상승 영향
- Financials — Rising interest rates improve banks' Net Interest Margin (NIM), directly boosting profitability. Increased interest income from higher lending rates is expected to have a positive impact on the financial sector.
하락 영향
- Technology — Higher interest rates increase the discount rate applied to future earnings, lowering valuations for growth-oriented tech stocks. Overvalued AI and software companies face significant correction pressure.
- Crude Oil — Oil prices are in a clear downtrend, having dropped from $118 to $74 per barrel. Fears of an economic downturn due to rate hikes may dampen demand, exerting further downward pressure on prices.
DYAX 전담 분석
The sharp rise in inflation figures has triggered a significant shift in market expectations regarding monetary policy. As the Fed faces pressure to tighten conditions, the transition toward higher interest rates appears inevitable.
This macroeconomic environment is likely to lead to sector rotation, favoring value stocks over growth stocks while putting downward pressure on equities that rely heavily on low-cost financing.
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