Weakening rate-cut expectations, three major stock indices break through key moving averages, gold and silver plunge, China Gold Dragon Index closes down 1%

Middle East tensions push up oil prices and intensify inflation concerns, further cooling market expectations for Fed rate cuts

*S&P 500 index has fallen approximately 3.5% year-to-date

*Rate cut expectations have significantly shifted later

*Precious metals plummet

U.S. stocks closed lower on Thursday. Amid ongoing Middle East tensions and sharp oil price fluctuations, inflation expectations have risen again, and investors are becoming more cautious about the Federal Reserve’s future rate cut path, putting pressure on risk assets.

At the close, the Dow Jones Industrial Average fell 203.72 points to 46,021.43, down 0.44%; the S&P 500 declined 18.21 points to 6,606.49, down 0.27%; the Nasdaq Composite dropped 61.73 points to 22,090.69, down 0.28%. All three major indices fell below their 200-day moving averages, signaling a weakening medium-term trend. The S&P 500 has declined about 3.5% this year, reaching a four-month low. The market’s previous reliance on “rate cut trades” is loosening, and risk appetite has noticeably decreased.

【Top Stock Performance】

Tech giants generally under pressure, Nvidia down 1.02%, Microsoft down 0.71%, Apple down 0.39%, Meta down 1.46%, Google-A down 0.18%, Amazon down 0.53%, Broadcom up 1.24%, Qorvo up 2.91%, Google-C down 0.19%. Tesla fell 3.18%. The U.S. National Highway Traffic Safety Administration (NHTSA) upgraded its investigation into about 3.2 million vehicles equipped with full self-driving (FSD) systems, focusing on safety issues in low-visibility environments, further weighing on stock performance.

Micron Technology declined 3.78% after its latest quarterly earnings failed to boost investor expectations.

Sector-wise, 8 of the 11 major sectors in the S&P 500 declined, led by materials, down 1.55%, and consumer discretionary down 0.87%.

Amid the sharp decline in precious metals prices, mining stocks experienced significant sell-offs, with Newmont down 6.9% and Freeport-McMoRan down 3.3%.

Popular Chinese concept stocks were mixed, with the Nasdaq Golden Dragon China Index down 1%. Alibaba fell 7.09% after releasing earnings before the market open, showing a non-GAAP net profit of 17.11 billion yuan for the quarter ending December 2024, down 66.7% year-over-year. The report also indicated quarterly revenue of 284.84 billion yuan, up 2% YoY; in February, the Qianwen app’s monthly active users exceeded 300 million. Pinduoduo dropped 3.27%, Tencent Holdings (ADR) down 1.77%, Futu Holdings down 3.59%, JD.com down 0.64%, Baidu down 2.35%, Tencent Music down 0.10%, NIO up 1.20%.

【Market Overview】

Volatility in energy prices directly boosts inflation expectations and suppresses market valuations. Mike Dickson, head of research and quantitative strategies at Horizon Investments, said the market is reabsorbing recent statements from major central banks, with inflation risks once again becoming the dominant factor.

The Federal Reserve kept interest rates unchanged on Wednesday as expected. Chair Jerome Powell stated after the meeting that rising energy prices will temporarily boost overall inflation, but the scope and duration of this impact remain highly uncertain.

The adjustment in interest rate futures markets is more pronounced. According to CME FedWatch, the market currently expects only about 7 basis points of rate cuts in 2026, well below previous levels. Traders generally see a very low chance of rate cuts before mid-2027.

Investment banks are rapidly adjusting expectations. Morgan Stanley delayed its first rate cut from June to September, expecting 25 basis points cuts in September and December. The bank noted that the Fed’s cautious stance could further postpone rate cuts or even eliminate the possibility altogether.

However, Morgan Stanley also emphasized that if oil prices surge again, it could suppress economic activity and the labor market, potentially prompting a shift toward easing policies.

Globally, major central banks remain cautious. The Bank of England and the European Central Bank have held steady, citing rising uncertainties from Middle East conflicts.

Will Compernolle, macro strategist at FHN Financial, said this stance reminds markets that in an environment dominated by supply shocks, central banks may prioritize controlling inflation over supporting economic growth.

On the economic data front, the U.S. labor market remains sluggish with low hiring and low layoffs. For the week ending March 14, initial jobless claims fell to 205,000, down 8,000 from the previous week and below the expected 215,000. The four-week moving average dropped to 210,750, still within a historically low range.

In the bond market, the two-year U.S. Treasury yield, which is more sensitive to policy expectations, briefly rose to 3.96%, the highest since August last year, before closing at 3.782%, up 3.9 basis points. The 10-year Treasury yield reached 4.257%, also near a recent high.

Zachary Griffiths, head of investment-grade bonds and macro strategies at CreditSights, said that the rise in short-term yields reflects a market re-pricing of policy paths amid inflation and growth uncertainties. He added that high oil prices will erode consumer purchasing power and disposable income over the medium to long term, potentially slowing economic growth.

【Commodities Performance】

Affected by Iran’s attacks on Middle East energy targets, Brent crude oil briefly hit $119 per barrel during trading, though it later retreated and remained high. At the close, NYMEX April crude futures fell slightly by 0.19% to $96.14 per barrel; Brent crude rose 1.18% to $108.65 per barrel.

Precious metals experienced a significant pullback. Spot gold plunged 4.3% to $4,612, hitting a new low since early February; COMEX gold fell 5.9%.

Spot silver also declined 5.3% to $71.39.