Late at night, two rounds of sell-offs—and the Fed made its position clear

—When the market needs reassurance most, the Federal Reserve reminds everyone: if inflation doesn’t cooperate, the central bank won’t step in.

On Monday, all of the key indicators we were watching broke through critical levels across the board:

Oil prices surged sharply: U.S. crude jumped far above $75, closing at $78;

Gold prices fell sharply—at one point during the day, they dipped below $4,000;

U.S. stocks fell across the board: the Dow Jones dropped 0.26%, the S&P 500 fell 0.79%, and the Nasdaq fell 1.55%;

At the same time, the U.S. dollar index climbed above the 101 level, and the yield on 10-year U.S. Treasuries rose above 4.60%.

Crude oil, the dollar index, and U.S. Treasury yields all rose to dangerous levels, putting pressure on other markets. Compared with gold’s decline, U.S. equities look somewhat more cautious.

Yesterday there were many bearish developments—such as the U.S. launching attacks on Iran for three consecutive days, and the South Korean stock market plunging—but what worries us most is one sentence from the Fed:

Federal Reserve Governor Waller (a standard-bearer for the traditional “dove”/neutral camp) said: “If core inflation coming out this week is again running hot, then the FOMC will need to consider tightening monetary policy in the near term.”

First, Waller’s remarks came at around 00:00 Beijing time, when the market was still falling. The Fed didn’t prop up the market—instead, it triggered a second round of sell-off, which can be clearly seen in gold’s intraday action: one round was driven by oil prices, and the other was triggered by Waller’s speech.

Second, based on the remarks themselves, this is the most hawkish signal the Fed has sent so far this year—though it was conditional, the words “near-term rate hikes” are especially jarring, with a sense of urgency. The probability of a 25-basis-point rate hike in July has already risen to 50%.

In the past few weeks, the market could still comfort itself with the idea that “oil price gains are a temporary geopolitical shock; as long as core inflation (excluding energy and food) holds steady, the Fed won’t do anything.” But this time, Waller spelled it out directly: “We can no longer blame inflation on the prior tariffs and the surge in oil prices.”

Third, Waller chose the day before this week’s inflation data release (a forced intervention into inflation expectations). As a rule, before CPI data is released, Fed officials typically stay low-key. Wall Street’s overall expectation is that headline inflation will cool somewhat (the year-over-year increase is expected to fall from 4.8% to 4.2%), while core inflation remains unchanged (expected to stay at 2.9%)—which should have been good news, but the one Waller emphasized is core inflation.

What really happened yesterday wasn’t that the market suddenly feared war; it was that the market began trading all at once “high oil prices, high inflation, and a more hawkish Fed.” Today, the importance of CPI is whether it can dismantle the “near-term rate hikes” framework that Waller has just laid out.

Risk warning: This article is based solely on publicly available information and market data for information-sharing purposes only, and does not constitute any investment advice or any promise of returns. Financial markets involve risk, and investment decisions must be made independently based on one’s own circumstances.