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Nasdaq jumps 1.3% to lead back stock market while investors take testimony from Federal Reserve Powell calmly

US equities turned higher Tuesday morning, with technology-related stocks rising back from the previous session as investors appeared to take testimony from Federal Reserve leader Jerome Powell calmly as they looked for clues to the pace of future rate hikes and other plans to tighten monetary policy in 2022.

What do major indices do?
  • Dow Jones Industrial Average DJIA,
    increased 17.91 points, or less than 0.1%, to 36,086.78.

  • S&P 500 SPX,
    rose 15.88 points, or 0.3%, to 4,686.17.

  • Nasdaq Composite COMP,
    jumped 191.99 points, or 1.3%, to 15,134.82.

On Monday, the Dow and S&P 500 ended lower, while the Nasdaq Composite closed fractionally higher. According to Dow Jones Markets Data, Nasdaq’s reversal from a 2.7% landslide was previously the strongest intraday reversal since February 28, 2020. The late-day reversal was driven by companies that had seen the worst results so far this year, according to Dow Jones Markets Data. to Bespoke Investment Group.

What drives the market?

Powell testified before the Senate Banking Committee in a hearing on his nomination to serve another term as Fed chairman, as investors also considered speeches by regional Fed presidents and prepared Wednesday’s inflation data.

Read: 4 mistakes the Powell Fed made – from a previous insider

Powell painted a picture of a soft landing for the economy as the Federal Reserve moves to remove emergency stimulus measures and begin raising interest rates, although market participants increasingly expect the central bank to move much more aggressively than previously expected after inflation turned warmer and much more persistent than makers had predicted.

“It’s really time for us to move away from these emergency policy settings to a more normal level. It should not really have any negative effects on the labor market,” Powell said.

Read: Powell says the Fed can cool inflation without hurting the labor market

Powell is widely expected to be confirmed by the Senate.

Meanwhile, Kansas City Fed President Esther George said in a Tuesday speech that the central bank should quickly reduce its huge pile of $ 8.5 trillion bond holdings to help curb the highest US inflation in nearly 40 years and counteract unnecessary risk-taking. .

Cleveland Fed President Loretta Mester said she would support a rate hike in March if the economic backdrop is similar to current conditions. Mester said she sees the Fed raising interest rates three times in 2022. George and Mester are both voting members in 2022 of the Fed’s policy-making Federal Open Market Committee.

Technology and other so-called growth stocks – stocks in companies whose revenues and earnings are expected to grow faster than average – have been hit hard as government interest rates have risen in response to expectations that the Fed will be much more aggressive than previously expected in raising interest rates. in an attempt to limit inflation well above target.

The minutes from the FOMC meeting in December, which were published last week, showed that the central bank is considering several interest rate increases this year and reducing the balance sheet by almost 9 trillion dollars, which continues to grow as the previous quantitative easing program is discontinued. Some Wall Street banks, including Goldman Sachs and Deutsche Bank, are now looking at the Fed raising interest rates four times in 2022, in contrast to the three increases that Fed policy makers have put into what is known as the dot-plot forecast.

The return on the 10-year treasury TMUBMUSD10Y,
ended Monday at the highest level since January 17, 2020, and retreated slightly on Tuesday. The 10-year interest rate has increased by more than 25 basis points this year.

“We would not be surprised if growth stocks in technology and large companies conduct comeback rallies here and there along the way, but ultimately we believe value rotation is the better trend in 2022,” said David Bahnsen, chief investment officer at The Bahnsen Group, a Newport, California-based asset management firm with $ 3.4 billion in assets under management.

“Our position is that the broad market indices are vulnerable, and technology is the biggest weighting in these broad market indices, but selectivity from the bottom up still provides good opportunities for value in this environment,” he said.

Which companies are in focus?
  • Shares of American Airlines Group Inc.
    fell 1.5% after the operator updated its fourth-quarter guidance to reflect a performance that turned out not to be as bad as expected.

  • Life-science company Danaher Corp.
    said they expect core revenue growth in the fourth quarter to exceed their own guidelines, bolstered by better-than-expected results in all three operating segments. The stock rose 0.6 percent.

How is trading in other assets?
  • ICE US Dollar Index DXY,
    a measure of the currency against a basket of six major rivals, was down 0.3%.

  • Oil futures jumped, with the US benchmark CL00,
    up 3.8%, while gold futures GC00,
    rose 0.9 percent.

  • Bitcoin BTCUSD,
    rose 2.3 percent

  • Stoxx Europe 600 SXXP,
    rose 0.8%, while London’s FTSE 100 UKX,
    increased 0.6 percent.

  • Shanghai Composite SHCOMP,
    fell 0.7%, while the Hang Seng index HSI,
    ended fraction lower and Japan’s Nikkei 225 NIK,
    lost 0.9 percent.

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