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Stocks Pare Gains After Powell Hints at Recession: Mark...

Business Maverick

Business Maverick

Stocks Pare Gains After Powell Hints at Recession: Markets Wrap

Pedestrians are reflected in a window of the Nasdaq MarketSite in New York, US, on Wednesday, 15 June 2022. Stocks climbed, Treasury yields tumbled and the dollar pushed lower after Federal Reserve Chair Jerome Powell signaled outsized rate hikes will be rare as officials intensify their battle against rampant inflation. (Photo: Michael Nagle / Bloomberg via Getty Images)
By Bloomberg
22 Jun 2022 0

US stocks pared earlier gains after Federal Reserve Chair Jerome Powell reiterated his commitment to curb inflation during his congressional testimony and said that a recession could be a possibility. 

The S&P 500 and the tech-heavy Nasdaq 100 rose, coming off earlier highs. Treasury yields declined with the 10-year yield hovering around 3.14%. The dollar fell after earlier gains while other safe haven assets like gold climbed.

The S&P 500 is poised for its worst first half since Richard Nixon’s presidency as optimism evaporates that policy makers can achieve a soft landing as they navigate a course of aggressive monetary tightening to tame inflation. Powell, on Wednesday, said that the central bank will keep raising interest rates to tamp down on inflation, mostly restating his comments from a last week. While he made no reference to the size of future hikes during his testimony, he tacitly admitted that the Fed has failed to get its job done.

“Such aggressive tightening will make a soft landing very difficult to engineer and those fears of recession or at least significantly slower growth are hitting demand for equities,” Fiona Cincotta, senior financial markets analyst at City Index, said in a note.

 

Bad Vintage | The S&P 500 Index is set for its worst first half since 1970

The market continues to be skeptical about the outlook for risk assets. Deutsche Bank AG’s Chief Executive Officer Christian Sewing joined a growing chorus of executives and policy makers who warn that the global economy may be headed for a recession as central banks step up efforts to curb inflation.

President Joe Biden plans call on Congress to enact a gasoline tax holiday to cool soaring pump prices and alleviate the pressure on consumers.

In Europe, stocks fell for the first day this week as miners and energy tumbled with commodity prices.

How will the second half of this year play out for major asset classes? We are re-running MLIV’s 2022 asset survey from December to see how street views have evolved amid the turmoil and volatility in the past few months. Click here to participate anonymously.

What to watch this week:

  • Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
  • Powell US House testimony, Thursday
  • US initial jobless claims, Thursday
  • PMIs for euro zone, France, Germany, UK, Australia, Thursday
  • ECB economic bulletin, Thursday
  • US University of Michigan consumer sentiment, Friday
  • RBA’s Lowe speaks on panel, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 0.2% as of 11:06 a.m. New York time
  • The Nasdaq 100 rose 0.7%
  • The Dow Jones Industrial Average was little changed
  • The Stoxx Europe 600 fell 0.5%
  • The MSCI World index rose 1.9%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The euro rose 0.5% to $1.0590
  • The British pound rose 0.2% to $1.2304
  • The Japanese yen rose 0.5% to 135.84 per dollar

Bonds

  • The yield on 10-year Treasuries declined 14 basis points to 3.14%
  • Germany’s 10-year yield declined 14 basis points to 1.63%
  • Britain’s 10-year yield declined 19 basis points to 2.46%

Commodities

  • West Texas Intermediate crude fell 4.5% to $104.62 a barrel
  • Gold futures rose 0.1% to $1,841.50 an ounce
Gallery

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