Late Post-Fed Drop in US Stocks Should Aid Treasury Rebound

Equity Futures: Dow +105.00. S&P +7.80. NASDAQ +11.50. Japan Nikkei +40.00. German DAX +10.00.

U.S. Trade: The global equity markets showed positive momentum for most of the day, but the participation was light, and that seems to have been a factor in the Wall Street close, which saw a heavy drop at the end, though not into negative territory. Both the futures and cash equity markets managed to advance throughout the U.S. session, even though two important macroeconomic reports, the ISM Non-Manufacturing PMI and the ADP Non-Farm Employment Change undershot market expectations.

However, the volatility of going into the FOMC announcement on interest rates at the high of the day was always going to require some extra volume to hit the floor if that long play was to be extended. The whole day's gains, which were accrued in 23 hours, or stair-step moves higher, were pretty much wiped out in the elevator ride that hit with just 15 minutes left in the session.

It was enough to take our minds back to the heady days of the credit crisis, when traders would toss a coin as to which direction the market would take in the last 15 minutes of trading. It was a given that it would surge or drop 1.5%, but nobody knew which one it would be.

Ahead of the Fed, the S&P futures market tested the 1060.00 area, but failed to break above that price point. From there, futures lost a few points, but recovered shortly after the FOMC statement was released. The rest however, as they say, is history, and leaves us with as many questions as answers as to what Chicago futures traders will wake up to on Thursday after Asian and European markets absorb a raft of red-flag economics, including two interest-rate decisions.

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Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.