US equity indices closed mixed yesterday. The S&P 500 fell 0.57%, the Nasdaq 100 dropped 1.15%, and the Dow Jones Industrial Average gained 0.64%.

The bond market rallied, as did gold, while oil fell for a fourth consecutive day. Brent has already slid below $79 a barrel, losing about 15% over four trading sessions.

The logic behind market moves is simple: if oil remains below $80, the inflationary shock from the Strait of Hormuz closure will begin to dissipate quickly. In May, with oil above $95, US CPI reached 4.2%—a 2023 high—and the probability of a Fed rate hike by December exceeded 80%. The picture is now changing. It seems clear that rate hike expectations will fade as energy inflation subsides, and that is precisely the scenario markets are beginning to price in.

The central intrigue of the day is the first Federal Reserve meeting under Chair Kevin Warsh. No change in rates is expected, but markets are eager to learn how the new chair will communicate with investors and how his rhetoric will reflect the altered oil backdrop.

Views on interest rates have diverged sharply. PGIM expects three rate increases this year; BNP Paribas also forecasts three hikes beginning in December, while Citigroup predicts cuts by year-end. Such dispersion in forecasts is rare for the Fed and is itself a source of volatility. A second question markets will pose to Warsh is whether he intends to reduce the Fed's balance sheet; he has previously pledged to do so.

Elsewhere, as noted above, gold has strengthened—up more than 6 percent over four sessions. The metal benefits from two factors at once: easing inflation expectations remove a primary headwind, and a softer dollar makes gold cheaper for international buyers. If Warsh signals a dovish stance this evening, gold could add to its gains.

A technical outlook for the S&P 500 suggests that the immediate task for buyers today is to overcome resistance at $7,544. Doing so would demonstrate upside momentum and open the way to $7,574. Managing to hold above $7,604 would further strengthen the buyers' position. If risk appetite wanes and the market moves lower, buyers must defend the $7,518 area. A breach below that level would quickly push the index back to $7,494 and open the path to $7,474.