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Wall Street closed the midweek session in negative territory after the Federal Reserve announced a 25-basis point rate hike overnight, marking the 10th straight rate hike in the US in a bid to tackle the country’s 40-year high inflation. Early investor optimism was dented after Fed Chair Jerome Powell ruled out cutting interest rates as he doesn’t expect inflation to fall quick enough. The Dow Jones industrials index fell 0.8%, the S&P500 lost 0.7% and the tech-heavy Nasdaq dropped 0.46%. While interest rates have risen again in the US, there are signs of the tight labour market loosening as US job openings fell for a third straight month in March and layoffs increased to the highest level in more than 2-years. The manufacturing sector is also contracting, and the consumer is struggling with the rising cost of living in the world’s largest economy. On the contrary, the US ISM Services PMI increased to 51.9 points in April from 51.2 points in March, which was higher than expectations and marks the fourth consecutive month of growth in the services sector.

Over in Europe, markets closed slightly higher ahead of the Fed’s latest rate decision which was announced after the closing bell in the region. Germany’s DAX rose 0.56%, the French CAC added 0.28% and, in the UK, the FTSE100 rose 0.2%.

The local market closed almost 1% lower on Wednesday in the aftermath of the RBA’s shock 25-basis point rate hike announcement on Tuesday. Further turbulence in the US banking sector and a slump in oil prices caused investors to flee financial and energy stocks on Wednesday, while communications services and consumer staples stocks were the only sectors to end the midweek session in the green. The energy sector dived over 2% on Wednesday as oil fell 1.5% on Wednesday to US$70.60/barrel amid concerns about the US economy discussing ways to avoid a debt default and investors preparing for further rate hikes to come in the region. US Treasury Secretary Janet Yellen said the US government could run out of money within a month while the White House said President Joe Biden would not negotiate over the debt ceiling, but said he will discuss starting a ‘separate budget process’. While it was a red day on the ASX yesterday, gold stocks rallied as investors shifted into the safe-haven assets amid rising fears of further banking turbulence to come. Gold Road Resources led the winners on the local bourse yesterday, rising 4.68%, while West African Resources added 4.28% and Evolution Mining lifted 3.74%.

What to watch today:

• Ahead of the local trading session the SPI futures are anticipating the ASX to open almost half a percent lower on Thursday.
• On the commodities front this morning, the price of oil has dived over 8% to trade at US$65.99/barrel following the Fed’s rate hike decision, while gold is up 1.7% at US$2050/ounce and iron ore is flat at US$105/tonne.
• The Aussie dollar is buying US$0.67, 89.65 Japanese Yen, 53.20 British Pence and NZ$1.07.
• Stocks trading ex-dividend today include Jupiter Mines (ASX:JMS) and Waterco (ASX:WAT). If you’ve been thinking about these stocks it might be worth considering buying in today as stocks trading ex-dividend generally trade lower on the ex-dividend date.

Trading Ideas:

• Trading Central has identified a bearish signal on Fortescue Metals Group (ASX:FMG) following the formation of a pattern over a period of 29-days which is roughly the same amount of time the share price may fall from the close of $19.99 to the range of $16.60 to $17.20 according to standard principles of technical analysis.
• Trading Central has also identified a bearish signal on Nine Entertainment (ASX:NEC) following the formation of a pattern over a period of 202 days which is roughly the same amount of time the share price may fall from the close of $2.03 to the range of $1.57 to $1.65 according to standard principles of technical analysis.