Dow down more than 200 points as investors focus on Powell’s testimony from the Fed
U.S. stocks were down on Tuesday morning, as traders turned to confirmation hearing testimony from Federal Reserve Chairman Jerome Powell for clues as to how quickly interest rates could rise in the future. 2022, as tech-related stocks tried to climb after reversing heavy losses from the previous session. .
What are the main indexes doing?
The Dow Jones Industrial Average DJIA,
fell 202.03 points, or 0.6%, to 35,866.84.
The S&P 500 SPX,
was down 20.11 points, or 0.4%, to 4,650.18.
The Nasdaq Composite COMP,
was down 21.13 points, or 0.1%, after briefly slipping into positive territory.
On Monday, the Dow Jones and S&P 500 ended lower, while the Nasdaq Composite closed slightly higher. According to Dow Jones Markets Data, the Nasdaq reversal from a 2.7% decline earlier was the strongest intraday reversal since February 28, 2020. The late-day reversal was caused by companies that had experienced the worst performance since the start of the year, according to the bespoke investment group.
What drives the market?
Market participants tuned in to Jerome Powell’s nomination hearing for a second term as Federal Reserve Chairman, as well as speeches from regional Fed Chairmen throughout the day, keeping take a look at Wednesday’s inflation data.
Read: 4 mistakes the Powell Fed made – from a former insider
In prepared testimony for the Senate Banking Committee hearing released Monday evening, Powell said the Fed will take action to ensure that the higher inflation seen over the past year is not overwhelmed. not allowed to take root deep in the economy.
“During Jerome Powell’s confirmation hearing in the Senate, I expect some political demagoguery, but this is a comment on the Senate attendees, not on President Powell himself,” said David Bahnsen, director. investments by the Bahnsen group. “I think Powell will stick to his script because he’s usually pretty disciplined to do it and I don’t expect anything that would surprise the markets.”
Powell is widely expected to be confirmed by the Senate.
Meanwhile, Kansas City Fed President Esther George said in a speech Tuesday that the central bank should quickly cut its massive $ 8.5 trillion stack of bonds to help curb U.S. inflation. higher for almost 40 years and discourage undue risk-taking.
Cleveland Fed Chairman Loretta Mester said she would support a rate hike in March if the economic environment looked like current conditions. Mester said she sees the Fed hike rates three times in 2022. George and Mester are both voting members in 2022 of the Fed’s Federal Open Market Committee.
Technology and other so-called growth stocks – stocks of companies whose revenues and profits are expected to grow faster than average – have been hit hard as Treasury yields have risen in response to expectations that the Fed will be much. more aggressive than expected in the rate hike. in order to control inflation well above the target.
The December FOMC meeting minutes released last week showed the central bank was considering several rate hikes this year and cutting its balance sheet by nearly $ 9 trillion, which continues to grow as the previous program quantitative easing is complete. Some Wall Street banks, including Goldman Sachs and Deutsche Bank, now expect the Fed to hike interest rates four times in 2022, up from the three hikes predicted by Fed policymakers in what was said. calls the forecast in points.
The 10-year Treasury yield TMUBMUSD10Y,
finished Monday at the highest level since January 17, 2020, retreating slightly on Tuesday. The 10-year rate has jumped more than 25 basis points this year.
“We wouldn’t be surprised if large-cap tech and growth stocks came back here and there along the way, but ultimately we think value rotation is the best trend in 2022,” Bahnsen said in comments sent. by e-mail. “Our position is that large market indices are vulnerable and technology is the largest weight in these large market indices, but the upward selectivity still offers plenty of value opportunities in this environment.”
Which companies are targeted?
Actions of American Airlines Group Inc.
fell 1.5% after the carrier updated its fourth-quarter forecast to reflect performance that turned out not to be as bad as expected.
Life sciences company Danaher Corp.
said it expects core revenue growth in the fourth quarter to exceed its own guidance, driven by better-than-expected results in its three operating segments. Shares rose 0.6%.
How are other assets traded?
The ICE US Dollar DXY index,
a measure of the currency against a basket of six major rivals, was down 0.1%.
Oil futures pushed higher, with the US benchmark CL00,
up 1.7%, while GC00 gold futures,
increased by 0.5%.
was down 0.4%.
The Stoxx Europe 600 SXXP,
rose 0.8%, while London’s FTSE 100 UKX,
Shanghai Composite SHCOMP,
fell 0.7%, while the Hang Seng HSI index,
finished slightly lower and the Nikkei 225 NIK from Japan,