Global markets experienced sharp declines on Tuesday following Bank of America's revised Federal Reserve forecast. According to reports from The Financial Express, the bank now expects the Federal Reserve to implement three quarter-point rate hikes in 2026 - in September, October, and December - representing a significant shift from its earlier prediction of steady rates. This revision comes after half of the Federal Open Market Committee members projected rate increases, along with hawkish comments from new Fed Chairman Kevin Warsh, who may adopt a strategically hawkish stance to build credibility while preparing for potential cuts later. As per Reuters, 2-year Treasury yields have shot to their highest point in 16 months to trade at around 4.188%, while longer-dated yields have also risen sharply as investors price in aggressive Fed action. Market sentiment was weighed down by growing expectations that the U.S. Federal Reserve could remain hawkish, with traders increasing bets on additional rate hikes later this year.
Asian markets experienced severe selloffs with MSCI's broadest index of Asia-Pacific shares outside Japan falling 1.4%, while Japan's Nikkei declined 0.9% and South Korea's Kospi fell 4.6%. As reported by The Financial Express, the KOSPI's decline was attributed to a report indicating South Korea would be excluded from MSCI's developed markets index in the upcoming review. The cautious mood overshadowed the positive impact of easing geopolitical tensions after Washington waived some sanctions on Iran and both countries agreed to continue technical negotiations toward a broader agreement. The Hang Seng fell 1.5% to 23,350, while the Nikkei 225 plunged 3.55%* despite easing geopolitical tensions. Taiwan's TAIEX dropped 641 points, or 1.3% to 47,110, snapping a six-day winning streak as traders booked profits after a record high the previous session. On Tuesday, South Korea's Kospi led regional losses with a decline of almost 10%, ending the trading day at 8,203.84, while Japan's Nikkei 225 declined 3.55% to close at 69,788.38, breaking eight sessions of gains.
US stock futures continued the downward trend on Tuesday, with S&P 500 futures down 1.33% and Nasdaq 100 futures sliding 2.42% by 5:30 a.m. E.T., as reported by Reuters. On Monday, the S&P 500 and Nasdaq fell 0.37% and 1.32% respectively, while the Dow edged up 0.29%. Major technology stocks dragged the decline, with Sandisk falling more than 9% in premarket trading to lead losses in the Nasdaq-100. Chipmakers Micron and Marvell were down more than 7%, while Seagate also shed around 7%. Intel pulled back 6.7%, while AMD and Qualcomm lost more than 5% each. The State Street Technology Select Sector SPDR ETF (XLK) dropped 3%, and the VanEck Semiconductor ETF (SMH) fell around 5%. SpaceX traded 3% lower, putting it on pace for its fourth straight losing session. Seven of the eleven major S&P sectors ended higher, indicating that weakness was concentrated largely in technology and communication-services shares rather than reflecting a broad risk-off move.
Crude oil prices recovered modestly on Tuesday after a sharp selloff in the previous session, with Brent crude rising around 0.05% to trade at $77.9 a barrel after dropping more than 3% on Monday. As per HDFC Securities, the recovery came as progress in U.S.-Iran negotiations reduced fears of supply disruptions through the Strait of Hormuz. For India, softer oil prices remain a significant positive as they reduce imported inflation pressures, support the rupee and improve the outlook for oil-sensitive sectors such as paints, aviation, chemicals and consumer companies. The recent decline in crude has already contributed to improved sentiment in domestic equities. Brent crude futures edged below $76 a barrel for the first time since early March, as the number of vessels transiting through the Strait of Hormuz continued to build and oil prices in the physical market are almost back to pre-war levels.
According to The Financial Express, the 10-year Treasury yield rose 4.6 basis points to 4.497%, while Brent crude dropped 4% to $77.29 per barrel. As per Reuters, Brent crude futures edged below $76 a barrel for the first time since early March, as the number of vessels transiting through the Strait of Hormuz continued to build and oil prices in the physical market are almost back to pre-war levels. Waleed Said, technical analyst at Givtrade, noted that the broader outlook on US equities remains tilted bearish, with stocks running hot for months and valuations stretched. The analyst emphasized that Fed Chair Kevin Warsh's harder-line policy stance is now colliding with a market that hasn't fully priced in the consequences. Bank of America indicated the Fed might hold off on tightening only if job growth declines significantly, inflation eases, or a sharp stock market correction materializes. Liz Ann Sonders, chief investment strategist at Charles Schwab, noted that retail traders remain focused on AI and tech-related stocks but are shifting toward ETFs rather than individual stock trades, with corporate earnings continuing to serve as the most important underlying support for stocks.
