Markets hit pause on Wednesday, trying to recover from the chaos of Tuesday’s meltdown. U.S. Treasuries got battered, stocks tanked, and big tech took a beating, with the Nasdaq 100 logging its worst day in weeks.

Futures ticked up slightly, hinting at some calm, while Treasury yields steadied across the board. Even the dollar managed to rise for a second straight day.

The big shake-up came after traders dumped their expectations for a Federal Reserve rate cut before the year’s second half. Fresh U.S. economic data didn’t help either, painting a messy picture of inflation sticking around, driven by a surprisingly resilient economy. That left markets rattled, investors scrambling, and the Fed firmly back in focus.

Global markets split

Over in Europe, things looked brighter. The Stoxx 600 climbed for a second straight day, driven by optimism that 2025 could be a banner year for European equities. Deutsche Bank strategists led by Maximilian Uleer pointed to improving economic surprises, easing political tensions, and a potential Chinese stimulus as reasons for the upbeat outlook.

In Asia, it was a whole different story. Chinese stocks took a nosedive, with the benchmark index hitting its lowest level since September.

The fear? More U.S. tariffs, which could hammer an already shaky economy. Investors are glued to external factors shaping China’s economic prospects.

Meanwhile, commodities showed some life. Oil prices rose for a second day, boosted by a drop in U.S. inventories. Bitcoin, though, stayed stuck below $100,000 after tumbling yesterday.

All eyes on the Fed minutes

This week belongs to the Federal Reserve. At 2 p.m. ET on Wednesday, it will release minutes from its latest meeting, where policymakers cut interest rates by 0.25% but left everyone stunned with their hawkish “dot plot.” Those dots—representing where officials see rates heading—signaled that the Fed isn’t ready to loosen up anytime soon.

Recent data only reinforced that view. November job openings came in higher than expected, while December’s ISM services price index surged to 64.4% from 58.2% the month before. That’s a jump of more than 10% and the highest reading since January 2024.

Bond markets wasted no time reacting. The 10-year Treasury yield shot up to 4.699%, its highest level since late April. At the same time, traders slashed the odds of a January rate cut. According to CME Group’s FedWatch tool, the chances of a 25-basis-point cut fell to 4.8% from 8.6% the day before.

If you thought the Fed minutes were the only game in town, think again. The rest of the week is stacked with economic data and key events. The Eurozone releases PPI and retail sales numbers. China drops its CPI and PPI readings. And the U.S. wraps things up with its all-important jobs report on Friday.

There’s also the state funeral for former President Jimmy Carter, which has been declared a federal holiday, and a lineup of speeches from Fed officials, including Christopher Waller and Patrick Harker.

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