Posted on 03/04/2021 12:30:10 PM PST by Red Badger
U.S. stocks fell sharply on Thursday after Federal Reserve Chair Jerome Powell failed to reassure investors that the central bank would keep surging bond yields and inflation expectations in check.
The S&P 500 last traded down 1.6% after dropping 2.5% at its session low. The Dow Jones Industrial Average slid 440 points. At one point, the blue-chip benchmark tumbled more than 700 points. The Nasdaq Composite fell 2.3% as growth stocks came under pressure amid rising rates. Apple slipped 1.6%, while Tesla dropped 5.4%. The heavy losses pushed the Nasdaq into the red for the year.
The tech-heavy benchmark also fell into correction territory, down more than 10% from its recent high on an intraday basis.
Powell said the economic reopening could “create some upward pressure on prices,” reiterating that the central bank would be “patient” before changing policy even as it saw inflation pick up in what it expects would be a transitory fashion.
The Fed chief did acknowledge the rapid rise in rates recently caught his attention, but said the Fed would need to see a broader increase across the rate spectrum before considering any action, he said during the Wall Street Journal Jobs Summit Thursday.
Treasury yields, which have been keeping investors on edge in recent weeks, jumped to 1.54% after Powell’s remarks. Last week, the benchmark 10-year yield soared to a high of 1.6% in a sudden move that sparked a big sell-off in stocks. Yields then generally eased back down this week before Powell triggered another spike.
Some investors may have been disappointed that Powell didn’t make a strong hint of any changes in asset purchases by the Fed to contain the rapid increase in rates seen lately. Expectations were growing the Fed might implement an “Operation Twist” operation like it has done in the past where it sells short-term bills and buys longer-duration bonds.
“This was a minor negative as he failed to provide the type of reassuring comments investors were hoping for,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “He was vague about what actions specifically would be taken if the Fed felt yields were rising to excessive levels (he was given a few opportunities to endorse a change in QE duration but never did).”
Powell said price increases above the Fed’s 2% target for a couple quarters or more would not cause consumers’ long-term inflation expectations to materially change.
Gold shed more than 1% amid Powell’s comments.
“With long rates rising in response to his commentary, we are again seeing a market that is taking control of monetary policy from the Fed,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The Fed has put themselves in a tough situation and the only way out is if inflation does not rise further and does not get to their 2% target. If it does, they have a problem because they will be afraid to confront it with higher rates if they remain so focused on employment.”
On the data front, investors digested a better-than-expected reading on weekly jobless claims. First-time filings for unemployment insurance in the week ended Feb. 27 totaled 745,000, a touch below the Dow Jones estimate of 750,000, the Labor Department reported Thursday.
“We’re back to good news (for the economy) is bad news (for the market) and as interest rates move higher on expectations of better economic growth it has been hurting the stock market,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in a note.
Some believe additional stimulus measures could inject optimism into the market. The Senate is currently debating the $1.9 trillion relief package passed by the House on Saturday. President Joe Biden has backed a plan to cut the income caps for Americans to receive stimulus checks.
there is little that can be done to stop the debt train and the coming crash at this point.
The very real problem is they are only looking at half the metrics.
I agree with you and I’ve heard it is likely in the next several weeks.
Dandy Don sings, “The party’s ooooooover!......................
Welcome to BIDENomics..................
But hey, no mean tweets - so that's good.
Oil up to $64 a barrel, soon to be over $100. It’s like obumber is back.
He is.
He’s the one calling the shots...................
It will be fascinating to watch the media try to blame the 2022 recession - potential Depression - on Trump.
Frankly, it’s not impossible they’ll succeed. 49% of the American public are gullible morons.
You got that right. President Trump did such an excellent job managing our economy, and now Biden and his fellow travelers are well on their way to trashing it completely. It disgusts me no end.
Even if my portfolio goes down 50%, I still have enough to retire on. If it goes further than 50%, then I guess I’ll join you all in the breadlines.
Great - my IRA monthly statement came yesterday and is at record levels for me.
True. So true. But what does a parasite care? To them, free stuff costs the same at 20% inflation as it does at 0% inflation.
You might want to consider moving some assets around.................
Simple rule to get rich..
Buy lower sell higher.
Sp500 (500 biggest US stocks) is down from 3930 area to 3760 area today, or down 4.3%
Time to sell was at 3930.
I will buy if drops to 3635.
It used to be that oil prices being high was just plain bad for America.
But now that the USA is #1 oil producer in the world by far, isn’t it a mixed bag?
Tell me what a 30year bond is worth that yields 2% when interest rates jump to 10%?
Top 10 oil producers in 2020
United States: 19.51 million bpd
Saudi Arabia: 11.81 million bpd
Russia: 11.49 million bpd
Canada: 5.50 million bpd
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