Market anticipation of Fed announcement

What happened: Market anticipation of the Federal Reserve's policy decision drove a 1% increase in the CBOE Volatility Index (^VIX) to 18, as investors braced for potential rate hikes and mega-cap tech earnings. The Fed held rates steady at 3.5%-3.75%, but dissenters raised concerns about persistent inflation and a looming leadership transition. Meanwhile, U.S. Treasury yields remained largely unchanged at 4.358%.

Market impact: The uncertainty surrounding the Fed's decision and earnings reports from major tech companies like Microsoft and Alphabet kept investors on edge, pushing the VIX into the historically normal 15 to 20 band. This volatility affected broad markets, with Asian and European shares finishing mostly down ahead of the Fed announcement.

What to watch next: The evolution of this narrative hinges on the Fed's communication around future rate hikes and the upcoming earnings reports from Microsoft, Alphabet, Amazon, and Meta Platforms. Additionally, investors will closely monitor the Bank of Canada's interest rate decision later this week for further guidance on global monetary policy.