Shares rally as Fed Chairman Jerome Powell tackles inflation

In an early-morning rally, Wall Street stocks with the large indices, led by technology stocks, are holding back gains for the week. The turnaround comes as Federal Reserve Chairman Jerome Powell testifies to Congress, directing the central bank’s response to stubborn inflation that has plagued world markets.

As of 10:30 a.m. Eastern time, the S&P 500 was up 17 points, or 0.4%, to 3.782, while the Dow Jones industrial average was up 0.2%. The tech-heavy Nasdaq went up 1%. Oil prices fell more than 5%.

Equities have been slippery in recent weeks as investors adjust to higher interest rates, prompting the Federal Reserve and other central banks to increasingly push for record-high inflation. Investors are worried that the Fed risks slowing economic growth too much and bringing about a recession.

The Biden administration is very aware of the political risks of running inflation in an election year. The number that says things are generally going badly in the country is at the highest level of President Biden’s term, according to a CBS poll of Maybecause pessimism about the market, the economy and prices are pushing views forward – and weighs on optimization about both jobs and coronavirus, as we head into the summer.

On Wednesday, President Joe Biden will call on Congress to suspend federal gasoline and diesel taxes for three months with hopes of reducing financial pressure at the pump.

Powell’s appearance on Capitol Hill on Wednesday is the first of two days of testimony as part of the central bank’s semi-annual monetary policy report.

President Biden’s gas tax holiday would probably have skepticism in Congress


“For now, the fundamental catalyst for a more sustained rebound seems vulnerable, with all eyes on Fed President Jerome Powell’s testimony to further boost policy outlook and inflation expectations,” said Yeap Jun Rong, market strategist at IG in Singapore, in a commentary. .

Last week, the Fed raised its significant short-term interest rate by three times the usual amount – most since 1994, It has also just begun to show that some of the trillions of dollars in bonds it bought are rolling through the pandemic of its balance sheet. That should put upward pressure on interest rates in the longer term and is another way in which central banks attract support that was previously put under the markets to support the economy.

The Fed’s moves occur as some discouraging signals emerge across the economy, including declining retail spending and polluted consumer sentiment. The Fed could consider another such mega-hike at its next meeting in July, but Powell said increases of three-quarters of a percentage point would not be normal.

Fear of recession, stagflation

Amid growing concerns about a possible recession, economics are the eye on stagflation – a term coined in the 1970s defined as “persistent inflation combined with stagnant consumer demand and relatively high unemployment.”

“The danger of stagflation is considerable today,” the World Bank warned in a June 7 report. “Several years of above-average inflation and below-average growth are now likely.”

MoneyWatch: Economists warn of growing risks for “stagflation”.


Concerns about inflation and interest rates have been exacerbated by a spike in energy prices that followed Russia’s invasion of Ukraine, The price of American crude oil is up about 52% for the year. That has taken a bigger bite out of the stock market of people at the gas pump and causes a delay in spending elsewhere.

Oil prices fell back on Wednesday, with benchmark US crude shaking from $ 5.04 to $ 104.48 a barrel. Brent crude, the international standard, dropped $ 4.73 to $ 109.92 per barrel.

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