Global Markets Retreat as Hawkish Fed Signals and Rising Oil Prices Weigh on Sentiment

Index Update:  US equity futures edged lower on Thursday, with contracts for the three major indices down around 0.3%, as investors reassessed the likelihood of the Federal Reserve maintaining higher interest rates for longer. Treasury yields rose following hawkish signals in the latest FOMC minutes, which showed policymakers concerned that disinflation may take longer than expected, with some indicating rates could rise further if inflation remains above target. The rebound in crude oil prices added to inflation concerns. In pre-market trade, bank stocks declined amid higher yields, while major technology names pared prior gains as investors evaluated the sustainability of elevated data center capital expenditure plans. Additionally, one major company’s shares fell nearly 2% despite reporting a Q4 revenue beat and announcing a dividend increase.

Market Movers:  On Wednesday, the top gainers were Sensei Biotherapeutics, Inc. (+187.51%), followed by Cardio Diagnostics Holdings Inc. (+78.99%). On the contrary, Similarweb Ltd. (-34.62%), and Polaryx Therapeutics, Inc. (-27.02%) declined the most the same day.

Commodities Update: Oil prices surged on Thursday, with WTI rising to around USD 66 per barrel and Brent climbing above USD 71, both near multi-month highs, as fears of a potential US–Iran conflict intensified. Reports suggested that any US military action could evolve into a prolonged campaign, while nuclear talks between Washington and Tehran remained inconclusive despite references to a “general agreement” framework. US officials maintained that military force remains an option, heightening geopolitical risk premiums. Meanwhile, US crude inventories fell by 0.61 million barrels last week, partially offsetting the sharp 13.4 million-barrel build recorded previously, further supporting prices. In metals, gold advanced toward USD 5,000 per ounce and silver extended gains as investors weighed hawkish signals from the Federal Reserve’s January minutes alongside upcoming US inflation and GDP data. Policymakers appeared divided on the rate path, prompting traders to scale back expectations for aggressive easing, though two rate cuts are still anticipated later this year. Geopolitical tensions and Middle East uncertainties supported safe-haven demand, even as a stronger dollar limited broader upside. In contrast, copper retreated to around USD 5.78 per pound, pressured by dollar strength, rising exchange inventories, and softer demand in China during the Lunar New Year holiday.

Macro Updates:  Strong Foreign Capital Inflows into US Securities in December 2025

The US recorded a net TIC inflow of USD 44.9 billion in December 2025, driven primarily by foreign demand for long-term securities. Private foreign investors accounted for USD 32.7 billion of the inflows, while foreign official institutions contributed USD 12.2 billion. Foreign residents purchased a net USD 62.9 billion in long-term US securities, led by USD 55.7 billion in private investment and USD 7.2 billion from official entities.  Meanwhile, US investors increased their exposure to long-term foreign securities with net purchases of USD 34.9 billion. Foreign investors also raised holdings of short-term US instruments, adding USD 9.7 billion in Treasury bills, while overall holdings of dollar-denominated short-term securities and related custody liabilities grew by USD 12.1 billion.

Fed Minutes Highlight Policy Divide and Inflation Uncertainty

The Federal Reserve’s January meeting minutes showed unanimous agreement to keep interest rates unchanged at 3.50%–3.75%. However, policymakers were divided on the path forward, with several warning that inflation could take longer than expected to return to the 2% target and suggesting that further rate hikes may be necessary if price pressures persist. The tone of the minutes contrasted with market expectations for declining inflation and lower rates this year. Additionally, artificial intelligence emerged as a key area of uncertainty, with officials split on whether its rapid growth would ultimately ease or intensify inflationary pressures.

Bonds Commentary:  The 10-year US Treasury yield rose toward 4.1% on Thursday, marking a third straight session of gains, as strong economic data and hawkish signals from the Federal Reserve weighed on rate-cut expectations. Minutes from the Fed’s latest meeting revealed divisions among policymakers, with some open to the possibility of further rate hikes if inflation remains above target. While traders slightly reduced expectations for easing, markets still anticipate two 25-basis-point cuts before year-end. Recent data pointed to resilient economic activity, including a sharp rise in industrial production, stronger-than-expected core capital goods orders, and housing starts hitting a five-month high. Investors are now focused on upcoming jobless claims, PCE inflation, and GDP data for clearer direction on monetary policy. Meanwhile, weak demand at the Treasury’s USD 16 billion 20-year bond auction added to upward pressure on yields.

Futures Update:  U.S. stock index futures declined on Thursday as investors reacted to hawkish signals from the Federal Reserve’s January meeting minutes and reviewed earnings from major retail and industrial companies. Dow Jones Futures fell 0.4% (190 points), S&P 500 Futures dropped 0.4% (25 points), and Nasdaq 100 Futures slipped 0.5% (120 points), indicating a weaker opening for Wall Street.

Stocks experienced a strong upward move in early trading on Wednesday but gave back some ground throughout the session. The major averages retreated from their session highs but still managed to close firmly in positive territory. The S&P 500 gained 38.11 points, or 0.56%, finishing at 6,881.32, as mentioned in our previous commentary for further upside potential. From a technical standpoint, the index is currently hovering around its falling 20-period EMA, which could limit further upward movement and may serve as a resistance level in today’s session. However, if the price breaks above this level, it could again target the 7,000 mark. The 14-day Relative Strength Index (RSI) remains below the midpoint, indicating lingering bearish sentiment. Key support is seen around 6,760, which could serve as a rebound level, while resistance is near 6,970.