Both the S&P 500 (SPX) and the Nasdaq 100 (NDX) are set to end the trading week on a sour note as interest rate cut odds continue to dwindle due to the risk of oil-driven inflation.
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Trade QQQ with leverageIn fact, a rate hike is now on the table. On the CME FedWatch tool, traders price in 12.4% odds of a 25 bps hike at the April 29 Federal Open Market Committee (FOMC) meeting, up from 6.2% a day ago and 0% a week ago. By year-end, the most likely outcome at 55.7% is for zero rate cuts, while the odds of one rate hike sit at 32.4% compared to 5.2% yesterday and 0% a week ago.
Oil Could Exceed Record Highs, Warns Goldman
Meanwhile, oil continues to trend higher. Goldman Sachs expects Brent crude to exceed its all-time highs set in 2008 in the event of a prolonged U.S.-Iran war and continued disruptions to the Strait of Hormuz.
The firm’s base case is more optimistic and calls for a steady rebound of oil flows starting in April, with Brent crude falling to the $70 range by the fourth quarter. However, risks to oil prices remain skewed to the upside as the war enters its third week.