Stock Markets faced a brutal dual-threat reality-check today, as shifting monetary policy and collapsing geopolitical diplomacy combined to trigger a violent late-session selloff.
The trading session was already under heavy pressure following incoming Federal Reserve Chair Kevin Warsh’s Senate confirmation hearing.
Warsh delivered a resolute but mixed-feelings message, emphasizing the need for a reform of Fed processes while hypocritically defending the central bank’s absolute independence (but not answering some critical answers on the issue).
By signalling a definitive end to the era of elevated balanced sheets Warsh forced equity bulls onto the defensive early in the day and sparked a notable intraday pullback.
However, the real fundamental damage arrived just before the closing bell.
With the critical April 22 ceasefire deadline looming at Midnight Pakistan time, reports suddenly hit the wire that the high-stakes US-Iran diplomatic negotiations scheduled in Islamabad had been abruptly canceled.
The Iranian side were apparently reluctant to save the deal – Nevertheless, President Trump just announced a Ceasefire extension. Talk about a bipolar end to the session!
Stocks crashed into the late session as the euphoric peace trade—which had just driven US Markets to all-time highs—burnt its feathers.
Algorithms and institutional traders scrambled to de-risk, dragging major indices to new lows at the close, while Crude Oil prices did the exact opposite.
But as per usual, the US President saved the day by announcing another Ceasefire extension, helping Futures to rebound (right after the Market close however, a classic play from the Administration).
Things are not expected to become much clearer for the time being, so Traders will have to remain on edge until a proper path to diplomacy gets reached.
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