U.S. stocks rose after Federal Reserve Chairman Jerome Powell reaffirmed his commitment to curb inflation and acknowledged the risk of a recession as some traders now expect the central bank to closely monitor the impact of rising interest rates on the economy.
The S&P 500 and the technological Nasdaq 100 have risen. Government bond yields declined, with 10-year yields hovering around 3.15%. The dollar fell after earlier gains, while other asylum assets, such as gold, rose.
Testifying in the Senate on Wednesday, Powell did not mention the size of future increases, but tacitly admitted that the Fed had failed to do its job and said it would be difficult to create a soft landing. However, some investors found confidence in Powell’s comments as a signal that the Fed will take into account the economic fundamentals and the likelihood of a recession as it moves toward curbing inflation.
“He acknowledged that interest rates will continue to rise, but the FOMC commission is aware that it is monitoring inputs that suggest the Fed will not be exclusively on autopilot with tightening,” said Joe Gilbert, portfolio manager for Integrity Asset. Management.
Powell’s tone was seen as “less hawk than feared” as there was no mention of an “unconditional” commitment to reducing inflation at the cost of higher unemployment, Krishna Guha of Evercore ISI and Peter Williams wrote in a note.
“The Fed is watching closely how the media and others are reacting to his communications, so we doubt this omission is accidental,” they wrote.
Others still expect more uncertainty on the horizon as investors analyze Powell’s testimony and comments by former New York Fed President Bill Dudley, who told a Bloomberg Opinion column Wednesday that a recession is “inevitable” in the next 12 to 18 months.
“No one will want to enter and want to buy a market, to invest something significant in the market, while you get this volatile volatility,” said Sean Cruz, chief sales strategist at TD Ameritrade. interview at Bloomberg headquarters in New York.
The market remains skeptical about the prospects for risky assets. Deutsche Bank AG CEO Christian Schuing has joined a growing chorus of executives and politicians who warn that the global economy may be heading for a recession as central banks step up efforts to curb inflation.
Bitcoin briefly fell below its key $ 20,000 level as investors remain worried about a global recession. Powell said Wednesday that there have been no significant macro-effects of the crypto decline so far. He also said Congress needs to clarify who has the power to regulate it.
President Joe Biden plans to call on Congress to pause gasoline taxes to cool rising pump prices and ease pressure on consumers.
In Europe, stocks fell on the first day of this week as miners and energy fell with commodity prices.
What to watch this week:
- Fed Chairman Jerome Powell’s six-month Senate testimony Wednesday
- Powell’s testimony at the US House of Commons, Thursday
- Initial applications for unemployment in the United States, Thursday
- PMI for the euro area, France, Germany, United Kingdom, Australia, Thursday
- ECB Economic Bulletin, Thursday
- Consumer sentiment at the American University of Michigan, Friday
- Lowe of the RBA spoke at a panel Friday
Some of the main market movements:
Stocks
- The S&P 500 rose 0.9% at 2:10 p.m. in New York
- The Nasdaq 100 rose 1%.
- The Dow Jones Industrial Average rose 0.8%.
- The MSCI World Index rose 1.9 percent
Currencies
- The Bloomberg Dollar spot index fell 0.3%.
- The euro rose 0.5% to $ 1.0583
- The British pound was slightly changed to 1.2286 USD
- The Japanese yen rose 0.2% to 136.27 per dollar
Bonds
- 10-year bond yields down 13 basis points to 3.14%
- Germany’s 10-year yield fell 13 basis points to 1.64%
- Britain’s 10-year yield fell 16 basis points to 2.50%
Goods
- West Texas Intermediate crude fell 2.4 percent to $ 106.84 a barrel
- Gold futures rose 0.2 percent to $ 1,842.50 an ounce
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