The Federal Reserve's unexpected policy shift has triggered significant market volatility, with the odds of a 12-month rate cut surging by 40 percentage points to 102%. This dramatic change follows a reversal from the Fed's previously hawkish stance, raising concerns about the central bank's communication strategy.
The market's response has been robust, with the S&P 500 and Russell 2000 indices experiencing their strongest five-day gains since April. This broad-based rally, driven by increased trading volume, suggests a genuine buying trend rather than a temporary oversold bounce. The participation of various sectors, including regional banks and small caps, underscores the strength of the market rebound.
Fed Policy Reversal Fuels Market Volatility and Rate Cut Speculation
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