Dow Jones closes in the red: Powell dampens interest rate hike fears somewhat

Dow Jones closes in the red
Powell dampens rate hike fears somewhat

Statements by Federal Reserve Chairman Powell are now causing recovery on Wall Street. But the Fed remains on course and investors’ fears of a recession are not allayed. The Dow Jones closes in the red, oil prices drop significantly.

The US stock exchanges recorded small losses after a changeable up and down. The highly volatile environment on Wall Street thus persisted and concerns about a recession have not been dispelled. Of the Dow Jones Index fell 0.2 percent to 30,483 points. Of the S&P 500 and the Nasdaq Composite each closed 0.1 percent lower. 1,561 (Tuesday: 2,473) price winners and 1,720 (830) losers were seen. 116 (96) titles closed unchanged.

With statements by US Federal Reserve Chairman Jerome Powell in the early business, the stock market had recovered in the meantime. Powell is sticking to the fight against inflation. But he stressed that the US economy is very strong and well positioned to cope with tighter monetary policy. The Fed doesn’t want to cause a recession. He also emphasized that the markets had priced in the interest rate path “appropriately”. According to Evercore ISI, Powell has been a little less hawkish than expected.

S&P 500
S&P 500 3,760.55

But the Fed remains on course. Fed Richmond Branch President Thomas Barkin has signaled his support for a rate hike of another 50 to 75 basis points in July. Such a rate hike feels “pretty reasonable,” Barkin said. Barkin described inflation as “high, broad-based and persistent”. Charles Evans of the Fed in Chicago also expects a step of this magnitude. However, he sees no need for a super-large rate hike of 100 basis points. It doesn’t look like the Fed will be swayed by the 21% year-to-date decline in the S&P 500 index; ING analysts commented that their current rhetoric is that the US economy can handle higher interest rates.

According to a Fed research paper, the US economy faces an increased risk of recession over the next year or two as imbalances in goods and services markets, including the labor market, widen. The probability of a recession in the next four quarters is just over 50 percent and the probability of a downturn in the next two years is two-thirds.

Oil prices drop significantly

Oil prices fell significantly with recession concerns. The price for the barrel of the variety STI fell 3.9 percent that Brent-Price was down 3.3 percent. US President Joe Biden, meanwhile, plans to call for a three-month suspension of federal taxes on gasoline and diesel to tackle record-high gasoline prices in the country, according to senior government officials.

Crude Oil (Brent)
Crude Oil (Brent) 110.73

In the FX market, the dollar fell on Powell’s comments. Of the dollar index fell 0.3 percent. Government bonds were in demand as safe havens given the recession concerns. The yield on ten-year paper fell 12.9 basis points to 3.15 percent as prices rose.

The share of MetaPlatforms, the mother of Facebook, fell 0.8 percent. The company has agreed to change the fundamentals of the system following a critical investigation by US federal agencies into online corporate advertising practices. The authorities had accused the group of discriminating against users based on ethnicity, gender and other factors for housing advertisements on the meta-platform.

Merck with vaccine approval

The pharmaceutical company Merck & Co. (+1.3 percent) has received further approval for its pneumococcal vaccine Vaxneuvance in the USA. The company announced that the US Food and Drug Administration (FDA) has approved it for use in children and infants as young as six weeks old.

Merck Co
Merck Co 84.80

La Z Boy up 7.9 percent after the home decorator reported record fourth-quarter sales and profits. For the first quarter, La-Z-Boy forecast a sales increase of 7 to 10 percent compared to the same period of the previous year, despite existing macro- and geopolitical uncertainties.

Korn Ferry increased by 5.3 percent. The personnel service provider exceeded expectations in terms of sales and earnings in its fourth business quarter and posted record profits. In addition, the company gave an optimistic outlook because it expects the supply of skilled workers to be low for years to come.

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