In anticipation of further US Federal Reserve ‘patience’ regarding taking action on its much anticipated and feared interest rate hike plans, the Dow Jones Industrial Average spiked up 228 points last Monday. It appears the market sentiment is swinging all the way to positive territory amidst a broad perception that the next meeting of the US Federal Reserve’s Federal Open Markets’ Committee (FOMC) will not result in an interest rate hike announcement.
The FOMC will be meeting this Wednesday and will issue a statement after the meeting’s conclusion.
This latest DJIA three digit spike is just the latest of the index’s three digit moves. The index has moved three digits in six of its last seven sessions. This is a very clear indication of how volatile the DJIA has become. It is clear that market players are simply waiting for some sort of guidance as far as market direction is concerned. Considering the massive bull market rally in US stock markets over the past few years, it is understandable that many players are looking for some clear sign to cash out.
Expect more volatility if the FOMC minutes don’t spell out any clear guidance regarding when interest rates will get adjusted upwards.
One key driver for the DJIA spike is the continued rise of the US dollar in anticipation of interest rate hikes. It appears more and more investors are cashing out of stocks and trying to sell at the top. Thanks to the rising dollar, they have a ready place to park their profits.