U. S. stock market collapses after Powell’s comments on raising rates
2023.03.07 11:51
U. S. stock market collapses after Powell’s comments on raising rates
By Tiffany Smith
Budrigannews.com – As Federal Reserve Chair Jerome Powell told Congress that the central bank will likely need to raise interest rates more than expected in response to recent strong data, U.S. stock indexes fell on Tuesday.
Powell told U.S. lawmakers that the Fed is prepared to move in “larger steps” if the “totality” of incoming data suggests that tougher measures are required to control inflation.
The remarks were his first since the unexpected rise in inflation in January and the unusually high increase in payroll jobs reported by the US government for the month.
After Powell’s remarks in March, traders significantly increased their odds of a 50-basis-point rate hike, with money market futures pricing a chance of over 40%, up from 23% before the remarks.
In the meantime, it was anticipated that Fed fund rates would peak in September at 5.56 percent, up from 5.47 percent earlier.
According to Robert Pavlik, a senior portfolio manager at Dakota Wealth, “Powell is reiterating what we already know, but he’s not saying anything that’s dovish.” Additionally, “the market is feeling a bit nervous about the Fed’s next move – how many rate hikes are coming and how long are they going to keep rates up?”
The yield on two-year Treasury notes, which best reflects short-term rate expectations, returned to its highest level since 2007 at 4.96 percent, weighing on the tech-heavy Nasdaq. US/] As higher rates reduce the value of future cash flows, rising bond yields tend to weigh on equity valuations, particularly those of growth and technology stocks.
Investors are waiting for data later this week that is expected to show that nonfarm payrolls increased by 200,000 in February, compared to the 517,000 jobs reported in January, which was much stronger than expected.
According to Horizon Investments’ chief investment officer Scott Ladner, “A 50 bps hike in the next meeting is possible, but it is going to be dependent on the payrolls not slowing down and CPI numbers showing that the disinflation progress we’ve made is stalling.”
At 10:36 a.m. Eastern Time (ET), the was down 90.36 points, or 0.27 percent, at 33,341.08, 13.77 points, or 0.34 percent, at 4,034.65, and 15.15 points, or 0.3 percent, at 11,660.59.
The financial index led all 11 major S&P sectors in falling prices.
Rivian Automotive, an electric vehicle manufacturer, announced plans to sell bonds worth $1.3 billion, which resulted in a 10.5% drop in the stock.
(NASDAQ) Meta Platforms Inc. climbed 2.0 percent following a Bloomberg News report that the company will cut thousands of jobs in a new round of layoffs as soon as this week.
Snap Inc., owner of Snapchat (NYSE:) after Senator Mark Warner announced that a group of 12 U.S. senators will introduce legislation that would grant Commerce Secretary Gina Raimondo new authority to prohibit the Chinese-owned video app TikTok, gains were extended by 6.4%.
(NYSE) Dick’s Sporting Goods rose 9.9% following the retailer’s forecast of annual earnings that were higher than Wall Street estimates and its more than doubled dividend for the quarter.
On the NYSE, decliners outnumbered advancers 1.99 to 1, while the ratio on the Nasdaq was 1.54 to 1.
The Nasdaq saw 30 new highs and 77 new lows, while the S&P index saw 10 new 52-week highs and 4 new lows.
