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.
-12%.........................
How dare anyone question the Captain of the ship!
Damn the icebergs!! Full Screw Job Ahead!!
Is it coincidence he can tank a market quicker than Capt. Smith and the Titanic?
Sunk is Sunk. Does it matter how ya got there?
Talk about an E ticket ride. Cinch up your mask!
Thanks.
That was 2020, pre biden. Watch what happens this year.
ADJUST YOUR BUTTPLUGS, IT’S GONNA BE A BUMPY RIDE!..................
Powell can’t show he’s too much of a slave to stock and bond prices.
He’ll let a correction run a bit longer. If it gets to 20%, then he’ll act.
Besides, a 20% correction after the run up of the last 12 months would be totally normal.
Going back to checking market only on the 1st of the month, buckle up we are in for a bumpy ride these next couple of year.
We were only the #1 oil producer because oil prices were so low that the Saudis & friends decided to slow down their production. Now that the prices are going back up, we won’t be #1 anymore. Certainly not with Biden trying to do his best to hamstring domestic production.
Why not? The economic boom of 2017 ~ 2019 was credited to Obama.
You know what they say “Half the people are below average in intelligence, and average isn’t anything to brag about”.
(I’ve heard it’s more than half are below average.)
I was mostly all capital preservation in my 401k. I nibbled a little bit today at todays closing price (S&P 500 index fund).
If it drops a few more % points I may buy some more.
I could do fine trading the S&P in my 401k and Fidelity must know it too. If I make more that a few trades within a certain timeframe they suspend my ability to trade for a while.
Well, silver is manipulated by JPM, sector rotation is under way out of tech and into industrial’s, so infrastructure plays should be OK. CAT, MMM,GE, ect. I maintain my positions and just hedge using SQQQ and SPXS. They go up when the market goes down. Not perfect but close enough. I typically hedge about half the value of the portfolio. or you could just move into cash and wait. Cash is a perfectly acceptable position in these uncertain times. Some investors care way more about not losing money than they do about missing out on possible gains.
Just one opinion.
I had the luck of Irish in 2020 being 100% out of stocks in March 2020. When I saw that crash, jumped in with all my money in March & April. 75% out by end of 2020. Still hanging on to 25% longs in index funds. Not adding to longs yet, only will add to longs at 3636 level.
FED will not allow rates higher than 2% for next 4 years while Biden/Kamala are in office. FED can inject unlimited cash into the system as needed to keep interest rates down.
Don't exactly want to argue about it; but it was comments like these, on the surface, that ran me out of stocks in 2007.
Actually, the best way to weather the GFC of 2008 was probably given by Mary Hartman...sit on your hands...“everything's going to be all right and afterwards, we're all going to the House of Pancakes.”/s
His comments caused crude oil prices to explode. $3 gas is coming very soon nationwide.
Pre pay fertilizer at $184/T. Today it was $297/T
there’s going to be inflation no matter what the Fed does, and it’s already happening ...
inflation is going to be due to the fundamentals, not the financials, because energy prices are soaring and will continue to soar as a DELIBERATE consequence of the “Biden” administration push to shut down domestic energy production, ...
anything that needs to be heated, transported, farmed, grown, mined, smelted, processed, imported, retailed, synthesized or manufactured requires massive energy inputs and hence EVERYTHING consumed in daily life will necessarily increase in price regardless of how much artificial “liquidity” is pumped into the economy ...
“But now that the USA is #1 oil producer in the world by far, isn’t it a mixed bag?”
except within two years, the “biden” administration will guarantee that the USA is no longer the number one producer, but instead will be a net importer, and four years from now will likely be one of the world’s net energy importers ...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.