US stocks fell after Federal Reserve Chairman Jerome Powell reiterated his commitment to curbing inflation and acknowledged the risk of recession, though some traders now expect the central bank to watch closely. the impact of rate hikes on the economy.
The S&P 500 rallied for two days and the high-tech Nasdaq 100 also fell. Treasury yields declined with a 10-year yield hovering around 3.15 percent. The dollar fell after previous gains, while other safe haven assets such as gold rose.
Speaking in the Senate on Wednesday, Powell made no reference to the size of future rises, but tacitly admitted that the Fed has not done its job and said it would be difficult to design a soft landing. Shares faltered during the session as some investors found reassurance in Powell’s comments as a signal that the Fed will consider economic fundamentals and the likelihood of a recession as it moves to reduce inflation.
“It has acknowledged that rates will continue to rise, but the FOMC committee is aware of the incoming data suggesting that the Fed will not be exclusively on hardening autopilot,” said Joe Gilbert, portfolio manager at Integrity Asset Management.
Powell’s tone was perceived as “less hawky than feared” because the “unconditional” commitment to reduce inflation at the expense of higher unemployment was not mentioned, wrote Krishna Guha and Peter Williams of Evercore ISI in a note.
“The Fed is closely monitoring how the media and others respond to their communications, so we doubt that this omission has been an accident,” they write.
The odds of the Fed’s rate hike cycle extending beyond the November policy meeting, which is the week before the US midterm elections, have dropped sharply as traders continue to put the price of the prospects for a faster and harder political investment next year.
Others expect even more uncertainty on the horizon as investors analyze Powell’s testimony and comments from former New York Fed Chairman Bill Dudley on Wednesday in a Bloomberg opinion column. that a recession is “inevitable” in the next 12 to 18 months.
“No one will want to go in and buy a market, put anything important in the market while you get that volatility everywhere,” said Shawn Cruz, chief trading strategist at TD Ameritrade. an interview at Bloomberg headquarters in New York.
The market continues to be skeptical about the outlook for risky assets. Deutsche Bank AG CEO Christian Sewing has joined a growing chorus of executives and policymakers who warn that the global economy could go into recession as central banks step up efforts to curb inflation .
Bitcoin fell briefly below its key US $ 20,000 level as investors remain concerned about a global recession. Powell said Wednesday that there are no significant macro effects so far from the fall of cryptography. He also said Congress should clarify who has the authority to regulate it.
What to see this week:
- Powell’s testimony at the U.S. House on Thursday
- Initial unemployment claims in the US on Thursday
- PMI for Eurozone, France, Germany, UK, Australia, Thursday
- ECB Economic Bulletin, Thursday
- Consumer sentiment at the University of Michigan in the United States on Friday
- RBA’s Lowe speaks at the panel on Friday
Some of the main movements in the markets:
Stocks
- The S&P 500 fell 0.1% at 4 p.m. New York time
- The Nasdaq 100 fell 0.2%.
- The Dow Jones Industrial Average fell 0.2%.
- The MSCI World Index rose 1.9%.
Coins
- The Bloomberg Dollar Spot index fell 0.2%.
- The euro rose 0.3% to $ 1.0567
- The British pound fluctuated slightly to US $ 1.2265
- The Japanese yen rose 0.2% to $ 136.25
Good
- The yield on 10-year Treasury bonds fell 13 basis points to 3.14 percent.
- Germany’s 10-year yield fell 13 basis points to 1.64 percent
- The 10-year yield in the UK fell 16 basis points to 2.50 per cent
Goods
- West Texas Intermediate crude fell 3.7% to $ 105.46 a barrel
- Gold futures changed little