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US stocks push higher as Powell plans to return to 2% inflation while maintaining a strong labor market

US stocks push higher as Powell plans to return to 2% inflation while maintaining a strong labor market

 


U.S. stock indexes rose after a shaky start on Wednesday, leaving Wall Street potentially gaining ground after back-to-back losses, as investors listen to central bankers’ remarks amid fears surging inflation could hurt the larger economy of the world.

How are stock indices traded? The Dow Jones Industrial Average DJIA, +0.41%, rose 196 points, or 0.6%, to 31,143. The S&P 500 SPX, +0.17% is trading 15 points, or 0.4 %, to 3,836. The Nasdaq Composite COMP, +0.17% gained 42 points, or 0.4%, to 11,223.

On Tuesday, the Dow fell 491.27 points, or 1.6%. The S&P 500 fell 2% and the Nasdaq Composite 3%. All three posted their worst daily percentage declines since June 16, according to Dow Jones Market Data.

What drives the markets?

Federal Reserve Chairman Jerome Powell told a European Central Bank forum on central banking on Wednesday that he envisions a return to 2% inflation while maintaining a strong labor market, but warned that there was no guarantee that we could do so.

Investors also listened to remarks from European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Augustin Carstens, Director of the Bank for International Settlements, to address the same conference.

On US economic data, first quarter GDP was revised to show a decline of 1.6%, compared to the previous decline of 1.5%.

Stocks limped towards the end of a miserable first half. The S&P 500 is down 19.6% so far in 2022, hit by fears that inflation rates at multi-decade highs will seriously hurt household sentiment and the Federal Reserve’s response to the skyrocketing prices could tip the economy into recession.

Read: What’s next for the stock market after the worst first half since 1970? Here is the history.

On Tuesday, the Conference Board’s consumer confidence index fell in June to a 16-month low of 98.7, as consumers’ outlook on the state of the economy was the most cautious in nearly 10 years. The news helped turn Wall Steet’s early gains into heavy losses, with the Nasdaq Composite losing 3%, leaving the tech-heavy index to suffer a 28% loss for the year to date.

Last week, US equity markets rallied on the murky logic that a US recession would mean lower terminal fed funds rates and thus, was bullish for equities. That premise was reinforced by weak consumer sentiment data from Michigan, said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

See: Wall Street’s favorite stock sector has 43% upside potential as we enter second half of 2022

On Tuesday, even weaker consumer confidence data from the U.S. Conference Board caused the opposite reaction, with U.S. stocks falling, he added.

Wall Steets’ dive left Asian and European stock markets floundering. Hong Kongs Hang Seng HSI, -1.88% fell 2% and Japan’s Nikkei 225 NIK, -0.91% slipped 0.9%. Chinas Shanghai Composite SHCOMP, -1.40% fell 1.4% after President Xi Jinping reiterated that the regime’s tough COVID-19 policy was correct and effective.

The comments added to concerns that supply constraints in China could exacerbate global inflationary pressures. And such worries were illustrated in Spain on Wednesday, where data showed prices rose 10.2% in June, their fastest pace in 37 years. The European Stoxx 600 SXXP, -0.61%, fell 0.8%.

Oil prices soared, with WTI CL.1 crude, +1.76%, up 1.5% at $113.41 a barrel.

The yield on the 10-year US Treasury TMUBMUSD10Y, 3.144%, fell 1.3 basis points to 3.167%.

Shares of Pinterest Inc. PINS, +0.09% rose 0.2% after the social media company announced that co-founder Ben Silbermann was stepping down as chief executive and being replaced by a head of commerce e-mail from Google. Bed Bath & Beyond Inc. BBBY, -20.29%, fell 18.7% after reporting disappointing first-quarter fiscal results and the ousting of chief executive Mark Tritton. General Mills Inc. GIS, +5.07%, shares rose 4.7% after beating quarterly expectations. The company reported net income in the fourth quarter of $822.8 million, or $1.35 per share, nearly double the $416.8 million, or 68 cents per share, last year. Adjusted EPS of $1.12, ahead of the FactSet consensus for $1.01 per share. Other Assets The ICE US Dollar Index DXY, +0.39%, edged down 0.01%. Bitcoin BTCUSD, -0.63% fell 4.6% to trade near $20,120. GCQ22 August gold futures, -0.09%, gained $6.30, or 0.4%, to settle at $1,827.90 an ounce.

Sources

1/ https://Google.com/

2/ https://www.marketwatch.com/story/u-s-stock-futures-struggle-for-gains-ahead-of-gdp-data-11656495136

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