- Stocks edged higher on Tuesday despite Fed Chairman Jerome Powell’s hawkish comments.
- Chairman Powell pointed to little progress in combating inflation and suggested a longer-term policy of high interest rates.
- Government bond yields will reach record highs again in 2024.
U.S. stocks were mixed on Tuesday, with stocks swinging wildly after Federal Reserve Chairman Jerome Powell’s latest comments cast doubt on the possibility of rate cuts this year.
The central bank chief said during a panel discussion that recent statistics show that U.S. inflation remains stubbornly high and calls for more confidence in its trajectory.
“While recent data shows solid growth and continued strength in the labor market, it also shows that so far this year there has been no further progress towards returning to the 2% inflation target,” he said. “
His comments sent long-term government bond yields soaring to a 2024 record, showing investors are gaining confidence in a long-term high financial regime.
The federal funds futures market is now pricing in the first rate cut in September, rather than the long-touted June schedule.
“Fed Chair Powell has moved in a more resolutely hawkish direction, essentially emphasizing that the downward trajectory of inflation is essentially stalled,” said Quincy Crosby, chief global strategist at LPL Financial. ” he said. “Furthermore, he made it clear that there was no ambiguous stance on the rate easing schedule, and that the ‘higher for longer period of time’ narrative remained in place.”
Strong corporate earnings supported stock prices throughout the day, with the majority of S&P 500 companies beating previous expectations. Among the gains on Tuesday were Morgan Stanley and UnitedHealth, which grew nearly 3% and 6%.
Here are the U.S. indices as of Tuesday’s close at 4 p.m.
Here’s what else is happening today:
In Commodities, Fixed Income and Cryptocurrencies:
- West Texas Intermediate crude rose slightly by 0.01% to $85.42 per barrel. Brent crude oil, the international benchmark, fell to $89.92 per barrel.
- Gold rose 0.45% to $2,393 an ounce.
- The yield on the 10-year U.S. Treasury rose 3 basis points to 4.663%.
- Bitcoin fell 0.9% to $62,998.
