Stocks Slip and Yields Ease in Light of Powell’s Comments

On Wednesday, global indexes saw stocks edge lower for the most part, while Treasury yields eased, as investors were taking in the comments of Jerome Powell, the Chairman of the US Federal Reserve. He said that while there was certainly a risk of the economy slowing down too much because of aggressive hikes in interest rates by the central bank, it was the soaring inflation that presented the bigger risk.

Impact of Powell’s comments

The global stocks index of the MSCI fell, while the US dollar index climbed in light of the comments that Powell made while attending the annual conference of the European Central Bank in Portugal. The Fed’s chair said that their primary goal was to ensure that the market does not transition into a high inflation regime.

Investors have been concerned that an aggressive push by the US Fed in terms of interest rate hikes is going to drive the economy into recession. Experts believe that markets would continue to be choppy, as traders and investors take in economic data and come to their own conclusions.

Analysts said that the data shows that economic growth is slowing down already, as some sectors appear to be in recession, while others are doing quite well. There was a 4.9 basis point fall in the 10-year US government bonds, as they hit 3.158%, while the two-year Treasury yields rose by 0.2 basis points to reach 3.126%.

Index performance

There was a 0.31% or 96.69 points increase in the Dow Jones Industrial Average as it reached 31,043.68. Meanwhile, a fall of 0.04% or 1.61 points was recorded in the S&P 500 index which brought it to 3,819.94. The Nasdaq Composite also fell by 0.12% or 13.17 points to reach 11,168.37.

A 0.69% loss was reported in the continent-wide STOXX 600 index and a 0.52% fall in the MSCI index of global stocks. In the foreign exchange market, the dollar index recorded an increase of 0.373%, while the euro was trading at $1.0477, after a decline of 0.39%.

Inflation fears

Oil prices are fanning fears of soaring inflation, as they continued their increase for the fourth consecutive day. The concerns about tight supplies had offset worries about a weakening in the global economy. On Wednesday, a two-week meeting of the OPEC+ producers began on Wednesday, but any major changes in policy are highly unlikely.

Suhail al-Mazrouei, the Energy Minister of the United Arab Emirates (UAE) indicated that they are already producing oil close to their maximum capacity, which means supply will continue to be tight in the future. There was a 0.89% gain recently recorded in US crude futures, as they rose to $112.76 a barrel, while Brent crude had climbed up 1.03% on the day to reach $119.19.

Meanwhile, a 0.2% drop was recorded in spot gold prices, which brought them down to $1,815.79 per ounce. Pressure was also mounting in the cryptocurrency market, which saw Bitcoin prices plunge below the $20,000 threshold once more, indicating that investors are in for a tough run.

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