Key Takeaways
- • Nepal's NEPSE benchmark index fell to a six-month low on June 30, 2026, declining 24.63 points after seven consecutive sessions of losses, signaling sustained downward pressure in the domestic equity market.
- • U.S. equity markets experienced significant weakness in early June 2026, with the Nasdaq Composite plummeting 4.18% on June 5, the S&P 500 declining 2.64%, and the Dow Jones Industrial Average falling 1.35%, driven by recalibrated interest rate expectations.
- • Federal Reserve rate hike odds surged to 72.7% by year-end following a stronger-than-expected May jobs report (172,000 payrolls added), reversing prior easing expectations and widening interest rate differentials in favor of the U.S. dollar.
- • Broad-based equity weakness extended across multiple sessions and geographic markets, with sustained losses reflecting investor concerns about monetary policy tightening and macroeconomic headwinds.
Summary
Nepal's stock market hit a six-month low on June 30, 2026, as the benchmark NEPSE index declined 24.63 points following seven straight sessions of losses. The consecutive selloff underscores deteriorating sentiment in the domestic equity space and marks a notable reversal from prior strength, bringing valuations to levels not seen since late 2025.
Concurrent with weakness in emerging markets, U.S. equities suffered significant declines in early June. On June 5, the Nasdaq Composite plunged 4.18% to close at 25,709.43, while the S&P 500 fell 2.64% to 7,383.74 and the Dow Jones Industrial Average dropped 695.15 points (1.35%) to 50,866.78. The broad-based selloff reflected shifting expectations around Federal Reserve policy following the release of May employment data, which came in substantially stronger than consensus forecasts.
The May jobs report added 172,000 payrolls—more than double the expected 80,000—with outsized gains concentrated in leisure and hospitality (70,000 jobs) and non-education local government (50,000 jobs), attributable in part to early hiring ahead of the FIFA World Cup tournament scheduled to begin June 11 across 16 U.S. cities. This unexpectedly robust labor market data weakened market expectations for further Federal Reserve easing and triggered a sharp repricing of rate hike probabilities. According to the CME FedWatch Tool, the probability of a rate increase by year-end jumped to 72.7% on June 5, up from 50.5% the prior day, while the likelihood of the Fed holding rates steady at 3.50%-3.75% fell to 26.9%.
The higher interest rate environment dampened equity valuations across sectors, particularly technology stocks, which proved most sensitive to rising discount rates. Market participants factored in widening interest rate differentials in the dollar's favor, contributing to heightened volatility and sustained selling pressure across both developed and emerging equity markets through the period.
Concurrent with weakness in emerging markets, U.S. equities suffered significant declines in early June. On June 5, the Nasdaq Composite plunged 4.18% to close at 25,709.43, while the S&P 500 fell 2.64% to 7,383.74 and the Dow Jones Industrial Average dropped 695.15 points (1.35%) to 50,866.78. The broad-based selloff reflected shifting expectations around Federal Reserve policy following the release of May employment data, which came in substantially stronger than consensus forecasts.
The May jobs report added 172,000 payrolls—more than double the expected 80,000—with outsized gains concentrated in leisure and hospitality (70,000 jobs) and non-education local government (50,000 jobs), attributable in part to early hiring ahead of the FIFA World Cup tournament scheduled to begin June 11 across 16 U.S. cities. This unexpectedly robust labor market data weakened market expectations for further Federal Reserve easing and triggered a sharp repricing of rate hike probabilities. According to the CME FedWatch Tool, the probability of a rate increase by year-end jumped to 72.7% on June 5, up from 50.5% the prior day, while the likelihood of the Fed holding rates steady at 3.50%-3.75% fell to 26.9%.
The higher interest rate environment dampened equity valuations across sectors, particularly technology stocks, which proved most sensitive to rising discount rates. Market participants factored in widening interest rate differentials in the dollar's favor, contributing to heightened volatility and sustained selling pressure across both developed and emerging equity markets through the period.
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