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
    was up 196 points, or 0.6%, to 31,143.

  • The S&P 500 SPX
    traded down 15 points, or 0.4%, to 3,836.

  • The Nasdaq Composite COMP
    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 has warned that there was “no guarantee we could do that”.

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 concerns 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.

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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, U.S. equity markets rallied around the murky logic that a U.S. recession would mean lower terminal fed funds rates and thus, was bullish for equities… This premise was reinforced by weaker consumer sentiment data from Michigan,” said Jeffrey Halley. , senior market analyst at OANDA, in a note to clients.

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

Wall Steet’s plunge left Asian and European stock markets floundering. Hang Seng from Hong Kong HK:HSI
fell 2% and the Nikkei 225 JP:NIK
in Japan fell by 0.9%. China Shanghai Composite CN: SHCOMP
lost 1.4% after President Xi Jinping reaffirmed that the regime’s strict 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 XX:SXXP
fell 0.8%.

Oil prices soared, with WTI crude CL,
up 1.5% to $113.41 a barrel.

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

Companies in the spotlight
  • Shares of Pinterest Inc.
    rose 0.2% after the social media company said co-founder Ben Silbermann was stepping down as chief executive and being replaced by a Google e-commerce manager.

  • Bed Bath and Beyond Inc.
    shares fell 18.7% after the announcement of disappointing first-quarter results and the ousting of its chief executive, Mark Tritton.

  • General Mills Inc.
    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
    fell slightly by 0.01%.

  • BitcoinBTCUSD
    fell 4.6% to trade near $20,120.

  • GCQ22 August Gold Futures
    gained $6.30, or 0.4%, to settle at $1,827.90 an ounce.

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