Powell did not stop the market rebound: indices in the green despite a ‘hawkish’ tone

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Federal Reserve Chairman Jerome Powell sustained his recent hawkish tone to reaffirm his priority of taming high inflation with aggressive monetary policy, further raising the likelihood of a third big rate tightening. 75 basis points at interest rates on September 21 .

The anguish in the markets due to these liquidity restrictions seems to have already been discounted, as the indices reversed their losses, purchases are recorded and investors try to maintain yesterday’s rebound.

For now volumes remain low but posting gains, with the Dow Jones up 193 points or 0.61% and the S&P 500 another 30 points or 0.77%, while the Nasdaq is up 99 points or 0.85%.

However, Treasury yields did rise again after Powell’s remarks, with the two-year note rising almost 5 basis points again to 3.49%. “We need to act now, frankly, forcefully as we have been doing. I can assure you that my colleagues and I are firmly committed and will continue until the job is done,” Powell said in a question-and-answer session from the Cato Institute’s 40th Annual Monetary Conference in Washington.

“It is very important that inflation expectations remain anchored. What we hope to achieve is a period of below-trend growth,” added the senior official.

“We think we can avoid the kind of very high social costs that Paul Volcker and the Fed had to bring into play,” Powell said, referring to the central bank chairman from 1979 to 1987, when inflation was brought down by harsh rate adjustments. of interest.

Despite Powell’s remarks, a mild optimism has resurfaced in the market, after the drop in oil prices affected expectations that inflation could cool down and relieve pressure on the Fed.

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For now, it’s bank stocks that are outperforming today, with Goldman Sachs Group Inc (NYSE: GS ), Bank of America (NYSE: BAC ) and Wells Fargo (NYSE: WFC ) all up 1%-3%. . In the tech sector, AMD (NASDAQ: AMD ) is the most active, up 3.10%, followed by Tesla (NASDAQ: TSLA ) and Nvidia (NASDAQ: NVDA ).

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