US Fed Rate Hike Rattles Global Markets, Oil Prices Dip Amid Supply Concerns

Global markets reacted sharply to the US Federal Reserve's decision to raise interest rates by a quarter percent, signaling a continued hawkish stance. The Fed's unanimous vote and Chair Jerome Powell's assertion that the fight against inflation is ongoing sent ripples through stock and bond markets worldwide.

In the US, the Dow Jones Industrial Average fell significantly, while the S&P 500 and Nasdaq also experienced declines. The bond market saw a notable surge in yields, with the 10-year Treasury yield crossing the 5% threshold, a level not seen since 2007. This increase in yields is attributed to the Fed's aggressive monetary policy and concerns over persistent inflation, exacerbated by rising oil prices.

Oil prices experienced a sharp drop after initial gains, as the US government sought to calm fears of a global supply crisis. While tensions in the Persian Gulf and attacks on Saudi infrastructure had previously driven prices up, reassurances from US Energy Secretary Rick Perry regarding the temporary nature of a key pipeline shutdown helped to moderate prices. However, independent analysts expressed skepticism about the optimistic timelines for repair, citing satellite imagery of extensive damage.

The Israeli stock market is expected to open with a negative sentiment, influenced by the global downturn and the Fed's decision. Dual-listed Israeli companies trading in New York are returning with significant negative arbitrage gaps, particularly impacting the TA-35 index. Stocks like Tower Semiconductor and ICL are anticipated to lead the downward pressure, while names like NICE are expected to provide some support.

Looking ahead, analysts are reassessing their market forecasts. Ed Yardeni, a prominent Wall Street investor, has lowered his year-end target for the S&P 500, citing the rise in bond yields and increased risks of an economic slowdown. This sentiment is echoed by other strategists who are also cutting their forecasts, though some remain optimistic about the long-term resilience of the US economy.