The Fed still has a tightening bias, and Wall Street struggles with the tightening policy.
Jerome Powell says in his Fed comments, The Fed is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time.
With these words, U.S. Federal Reserve Chairman Jerome Powell just told everyone to stop with the dovish expectations. Recent comments show that the Fed still has a tightening bias. That’s according to JP Morgan, who comments and says that they will always be a reminder that the Fed isn’t over yet with its aggressive monetary policy.
Besides the first comments, Powle also added, “We are not confident that we have achieved such a stance. If it becomes appropriate to tighten policy further, we will not hesitate to do so.”
On the other hand, over the past three days, Wall Street main indexes have struggled to maintain their positive trading sessions, and today was no different. With hints that the U.S. interest rate hike cycle won’t be over, stocks are struggling to attempt to rebound.
At the same time, the media is trying to sell the idea of a soft landing and that there won’t be a recession; however, analysis and data suggest otherwise.
Broadly speaking, while the media hopes for no recessions, the data suggest otherwise, despite a strong job growth market, earnings reports, and the overall GDP growth rate. The scenario of no recession is likely to happen in 2024; it’s more likely to see a decline in stock profits and a decline in economic activities, especially in the chip-making sector and oil sectors. These two combined take up a huge piece of pie in the U.S. economy.
Meanwhile, in the stock market, the S&P 500 benchmark jumped by 1.1% to 4.339 bps.
The S&P 500’s eight-day winning streak recently reached its end due to Federal Reserve Chair Jerome Powell’s hawkish remarks and a lackluster government debt auction. As said before, the Fed president expressed uncertainty about the Federal Open Market Committee’s confidence in achieving an adequately restrictive monetary policy, signaling the potential for further tightening measures if necessary. The streak, if continued, would have been the index’s longest since 2004 and marked the 32nd such occurrence since 1928. Investors responded to Powell’s cautionary tone and concerns about future policy adjustments, contributing to the index’s break in momentum.
The tech-heavy Nasdaq post gained the same percentage, jumping by 1.1% in this week’s final trading session. On average, most high-technology stock brands were up by an average rate of 1.4% to 2.2%. The Dow Jones average also jumped by 0.85% with the expectation of getting a day by the end of today’s session.
As for the bond market, Powlle’s comments have erased any hope for interest rate cuts, which has reflected on the bond market. These comments contributed to increases in both the 10-year and 30-year Treasury yields. However, that increase was short; currently, at 15:45 a.m. ET, the 10-year Treasury yields were down by 0.1% and the 30-year yields were down by 1.6%.