Daily Market Review

Closing Recap

Wall Street roared back to life on Monday, shaking off the weekend’s geopolitical dread to post a broad-based rally, as investors braced for the outcome of tomorrow’s highly anticipated Federal Reserve policy meeting. The Dow Jones jumped nearly 390 points, and the Nasdaq surged 1.22% as investors seized on President Trump’s weekend diplomatic push to build a naval coalition in the Strait of Hormuz, which helped cool the parabolic spike in energy markets. Oil prices retreated violently, with WTI plunging over 5% to $93.50, providing massive relief to inflation-weary equity and bond markets. However, the macro landscape remains historically fraught. The Reserve Bank of Australia delivered a shock 25bps rate hike overnight, becoming the first major central bank to explicitly tighten policy in response to the Middle East energy shock. With the Fed, ECB, BOE, and BOJ all meeting in the next 72 hours, the market is bracing for a tectonic shift in global monetary policy.

Key Takeaways

• Stocks Staged a Relief Rally: The major indices erased steep early losses to finish green on the first trading day of the week, showcasing incredible resilience despite the escalating geopolitical situation and fading rate-cut hopes.
• Fed Rate Cut Bets Evaporate: The market has rapidly repriced expectations, with futures now indicating less than a full 25-basis-point cut is priced in for all of 2026, a massive shift from just weeks ago.
• The “Mega-Cap” Rebound: The S&P 500 (+1.01%) and Nasdaq (+1.22%) erased Friday’s losses. Nvidia caught a late bid as CEO Jensen Huang projected $1 Trillion in revenue through 2027 at the GTC Conference, temporarily distracting the market from the macro chaos.
• Oil Plunges 5% on Coalition Hopes: WTI Crude dumped $5.21 to settle at $93.50. The sell-off was driven by profit-taking and President Trump’s weekend efforts to assemble a global naval coalition to escort tankers through the Strait of Hormuz, easing fears of a total blockade.
• Morgan Stanley’s Recession Warning: MS warns that if oil sustains a move into the $125–$150 range, the probability of a U.S. recession jumps to 20%. This scenario severely complicates the Fed’s ability to cut rates in June, as energy-driven inflation remains sticky.
• RBA Hikes Rates in Surprise Move: The Reserve Bank of Australia delivered a surprise 25bp rate hike to 4.10% in a tight 5-4 vote, citing upside risks to inflation exacerbated by the oil shock.
• Precious Metals Slammed: Gold and silver were hit hard by the rising U.S. dollar and surging Treasury yields, with silver plunging nearly 5% and gold dropping over 1%.
• Gold’s “Supercycle” Target: UBS has raised its gold forecast to an astonishing $5,900 – $6,200 range for 2026. The bank cites structural de-dollarization and escalating U.S. fiscal debt as the primary drivers – tailwinds they believe are entirely independent of the current conflict in the Middle East.
• Bitcoin Recovers on Trump Comments: The crypto market found its footing, with Bitcoin rebounding above $74,000 after President Trump signaled support for the industry and urged banks not to stall key legislation.
• Record Dollar Longs: In a complete reversal from a few weeks ago, 1-month risk reversals for the Bloomberg Dollar Spot Index hit their highest bullish premium since 2022. Traders are aggressively betting on a sustained “Higher for Longer” Fed and a surging Greenback.
• “Super Central Bank Week” Begins: The RBA is just the opening act. The Fed, ECB, BOE, and BOJ all announce policy this week. Markets are terrified that the RBA’s hike will give cover for the ECB or BOE to pivot hawkishly to fight energy inflation.
• SEC/Earnings Rule Change: The SEC is reportedly drafting a proposal to allow companies to report earnings twice a year instead of quarterly, a massive potential shift in market transparency and volatility cycles.
• Japan’s Coordinated Verbal Intervention: BOJ Gov Ueda and Finance Minister Katayama issued coordinated statements warning against Yen weakness, signaling intense discomfort as USD/JPY flirts with the 160.00 intervention red line.

Market Overview

Monday was a classic “Relief Rally” predicated on the absence of bad news rather than the presence of good news. The fact that the weekend didn’t bring a massive escalation in the Middle East allowed algorithmic shorts to cover, dragging equities higher. The fear of a prolonged closure of the Strait of Hormuz has forced a rapid and aggressive repricing of inflation expectations, effectively killing the narrative of a dovish Federal Reserve. As Goldman Sachs and Morgan Stanley warned, the oil shock could significantly slow GDP growth while keeping inflation sticky, pushing the Fed into a more hawkish stance. However, the market’s seemingly unbreakable “buy the dip” mentality re-emerged as the day progressed. The catalyst was a combination of rumors that the G7 is preparing a massive, historic release of emergency oil reserves to calm the market, and comments from President Trump suggesting the war could be over sooner than expected.

Index	Up/Down	%	Last
DJ Industrials	-34.23	-0.07%	47,706
S&P 500	-14.46	-0.21%	6,781
Nasdaq	1.16	0.01%	22,697
Russell 2000	-5.59	-0.22%	2,548

This sent oil prices crashing back down from their intraday highs, providing a much-needed relief valve for equities. Despite the late-day recovery, the underlying macro landscape has shifted dramatically. With the RBA already delivering a surprise rate hike, the focus now turns to the Federal Reserve on Wednesday. The market is bracing for a decidedly hawkish tone from Chair Powell, recognizing that the era of easy money may be officially on hold as the fight against inflation enters a new, geopolitically charged phase. If the RBA is hiking to combat oil-driven inflation expectations, the bond market will violently reprice the odds of the Fed, ECB, or BOE doing the same. The 10-year Treasury yield dropping to 4.22% today might be the calm before the hawkish storm.

Economic Calendar

This week is arguably the most important of the year for central bank policy, with the RBA having already fired the first shot.

Data Released Yesterday / Overnight:

• RBA Rate Decision: A hawkish surprise. The RBA hiked rates by 25bps to 4.10% in a 5-4 vote, citing inflation risks exacerbated by the Middle East conflict.
• Japan Corporate Goods Price Index (Nov): Held steady at 2.7% y/y, keeping pressure on the BoJ.
• US Empire State Mfg: -0.20 (Weakness).
• US Industrial Production: +0.2% (Resilient).

Today’s Economic Calendar:

• European Session: An extremely light calendar with no major data releases.
• 10:00 GMT – German ZEW Economic Sentiment. (Watch for collapse in sentiment due to oil).
• U.S. Session: 12:30 GMT (8:30 ET) – US Retail Sales (Feb). Est: +0.4%. Critical read on the US consumer before the Fed meets tomorrow.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The energy market remains the epicenter of the crisis. The “War Premium” deflated slightly. WTI Crude dropped over 5% to $93.50, and Brent lost nearly 3% to $100.21, as traders priced in a potential U.S. naval escort coalition. Gold gave back $59 (-1.18%) to $5,002 as the extreme panic subsided, while Silver dipped 0.8% to $80.68, rapidly unwinding their recent haven-driven rallies.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-5.21	-5.28%	93.50
Brent Crude	-2.93	-2.84%	100.21
Gold	-59.50	-1.18%	5,002.20
EUR/USD	0.0081	0.71%	1.1495
USD/JPY	-0.50	-0.31%	159.21
10-Year Note Yield	-0.065	-1.52%	4.220%

The U.S. dollar is the undisputed king of the forex market this week, surging on safe-haven demand and a hawkish repricing of Fed expectations.

• EUR/USD: The 1.1500 Magnet (1.1495). The Euro is trapped near multi-month lows. The energy crisis is keeping the pressure on, but a massive $1.4 Billion option expiry at 1.1500 for today’s 10 AM NY cut is pinning price action. Traders are paralyzed ahead of the Fed (Wed) and ECB (Thurs).
• GBP/USD: Retail Sales Rescue? (1.3300). Sterling is bouncing off the 1.3250 lows, but the technicals are awful. The UK economy is stalling, and the BoE meets Thursday. A weak UK CPI print tomorrow could send Cable through the floor.
• USD/JPY: The 160.00 Standoff (159.21). The pair is hovering just below the Ministry of Finance’s pain threshold. Coordinated verbal intervention from Tokyo overnight kept a lid on the pair, but the yield differential remains massively dollar-bullish.
• AUD/USD: The RBA Squeeze (0.7060). The Aussie initially spiked on the RBA’s surprise hike but quickly faded as the 5-4 split vote suggested deep internal division. However, it remains the only G10 currency backed by an actively hiking central bank.

Cryptocurrencies: Bitcoin staged a strong recovery, surging over 4% to near $74,500. The move appears to be driven by a wave of short liquidations and supportive comments from President Trump regarding crypto regulation, allowing the asset to decoupled slightly from the broader macro anxiety.The crypto market is heavily front-running a potential “Soft Fed” tomorrow, treating the oil shock as a problem for fiat, not Bitcoin. U.S. Treasury yields experienced wild swings, initially surging on inflation fears tied to the oil spike before falling back late in the day. The benchmark 10-year yield finished slightly lower around 4.22% after hitting a one-month high earlier in the session. A 20-year bond auction saw very weak demand, highlighting fiscal concerns.

Looking Ahead

Today is the calm before the FOMC storm. The market is positioned for the Fed to hold rates steady tomorrow, but the dot plot (rate projections) is the true wild card. If the Fed removes rate cuts from 2026 due to the energy shock, yesterday’s equity rally will be instantly erased. Furthermore, keep an eye on the Strait of Hormuz; any news that the U.S. naval coalition is failing to materialize will send oil ripping back toward $105.

What to Watch Today

• US Retail Sales (8:30 ET): If the consumer is cracking under the weight of inflation, a miss here will send bond yields lower and could weaken the Dollar heading into the Fed.
• EUR/USD Option Pin: Watch the 1.1500 level into the 10:00 AM ET cut. It will be very difficult for the Euro to break out of this gravitational pull today.
• Trump & Xi Delay: Trump requested to postpone his meeting with China’s Xi until April due to the Middle East conflict. This signals the White House expects the Iran situation to persist, a bearish undertone for global trade.
• Yen Intervention Trigger: If US Retail Sales come in hot, pushing US yields higher, USD/JPY will test 159.80. The BOJ/MOF will likely pull the trigger on intervention if 160.00 is breached.