Fed has probably spoiled the Santa rally, and more [Video]

Sometimes, the truth is hard to say—and even harder to hear. The Federal Reserve (Fed) announced another 25bp cut as widely expected and priced in, but hinted that there will be just about two rate cuts throughout next year.

The market reaction was very aggressive, of course. The US yields and the dollar jumped, the S&P500 sold off nearly 3%. The Fed probably spoiled this year’s Santa rally, as its hawkish shift could trigger a deeper correction across US equity markets.

In commodities, oil sold off and gold tipped a toe below the $2600 per ounce and below its 100-DMA. Higher US yields increase the opportunity cost of holding the non-interest bearing gold, yet an accelerated selloff and a prolonged weakness in equity markets could drive capital toward the safety of the yellow metal.

Elsewhere, the Bank of Japan (BoJ) refrained from announcing a rate cut and the Bank of England (BoE) is expected to do nothing, too.