4.12pm: Powell fails to unsettle markets
US markets enjoyed a positive session as investors took heart from a speech by Federal Reserve chairman, Jerome Powell, which steered clear of rhetoric on interest rates and inflation and as a result didn’t unnerve market sentiment.
At the close the Dow Jones Industrial Average was up 186 points, or 0.56%, to 33,704, the S&P 500 rose 27 points, or 0.7%, to 3,919 and the Nasdaq Composite advanced 107 points, or 1.01%, to 10,743.
Powell focused on the importance of central bank independence when making unpopular decisions and that it should “focus on our knitting” steering clear of influencing policy in certain areas.
In particular he referenced climate policy stating “We are not, and will not be, a climate policymaker.”
Michael Hewson at CMC Markets said, “There had been an expectation that today’s comments from Fed chairman Jay Powell in Stockholm might contain a hawkish narrative, however he confined himself to talking about climate change, and the Fed’s reluctance to become involved in policy around that, rather than the investment climate.”
“This lack of comment on monetary policy matters has helped lift markets.”
Stocks on the move included Warner Brothers Discovery which jumped 8.2% after Bank of America added the stock to the “US1” list of best investment ideas while biopharm company, CureVac soared 21% after saying it plans to advance patient trials of its mRNA vaccines for Covid-19 and the flu.
12:17pm: Investors look ahead to inflation report on Thursday
At midday, the Dow was down 13 points to 33,504, the Nasdaq Composite was up 30 points, 0.3%, to 10,666 and the S&P 500 declined 7 points, 0.2%, to 3,899.
The benchmarks started the day on the right foot, but it's been an up-and-down day of trading since.
“Stocks managed to dig out some optimism from behind of the sofa following Powell’s speech, relieved that he didn’t say anything particularly hawkish," said Chris Beauchamp, chief market analyst at online trading platform IG.
"But the respite will be limited; after a quiet day tomorrow the old bugbear of US inflation comes in on Thursday, swiftly followed up by the official beginning of earnings season. But perhaps there is hope here – current expectations point towards a decline in income for the reporting season, setting the bar comfortably low. Now we have to hope that earnings can step over it and give stocks a reason to move higher again.”
9.35am: Markets reverse after Fed chair Powell’s speech
After dipping into the red in pre-market trading, US stocks started the day in positive territory as investors digested the latest comments from Fed chair Jerome Powell who spoke at a forum on central bank independence in Sweden shortly before the market opened.
In his speech, Powell did not give any direct clues about where the Fed’s monetary policy was headed in 2023.
However, he spoke on the importance of ensuring price stability despite doing so being unpopular.
“Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time,” he said. “But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”
Forex.com market analyst Fawad Razaqzada said, after Powell’s speech, the focus would shift to the US CPI data being released on Thursday.
“So far in this new year, sentiment has remained largely positive with equities, commodities and foreign currencies rising against the US dollar,” he said.
“China has led emerging markets higher on hopes the re-opening there will provide a strong recovery in demand.”
Razaqzada continued: “Investors are also looking past the near-term rate hikes from central banks and hope that they will soon pause and eventually reverse policy tightening because inflation has peaked.”
Just after the market opened, the Dow Jones Industrial Average had added 67 points or 0.2% at 33,584 points, the S&P 500 was up 11 points or 0.3% at 3,903 points, and the Nasdaq Composite had gained 49 points or 0.5% at 10,685 points.
6.30am: Fed hawks weigh on equities
Wall Street is expected to open lower as traders await more comments from US Federal Reserve Chair Jerome Powell after hawkish rhetoric from Fed officials removed some of the shine from equities in yesterday’s session.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.3% in Tuesday pre-market trading, while those for the broader S&P 500 index shed 0.2% and contracts for the Nasdaq-100 declined 0.1%.
Powell is scheduled to speak at a banking conference in Stockholm before US markets open. His speech comes after Atlanta Fed president Raphael Bostic and San Francisco Fed president Mary Daly both said interest rates would go to at least 5%, with Bostic adding that they would remain there for a long time.
The Federal Reserve Bank of New York's Center for Macroeconomic Data's Survey of Consumer Expectations also showed inflation expectations continue to decline in the short term and were unchanged over the medium term.
At Monday’s close, the DJIA was down 0.3% at 33,518, the S&P 500 fell 0.1% to 3,892 but the Nasdaq Composite jumped 0.6% to 10,636.
“After yesterday’s mixed session on Wall Street, futures are suggesting more modest losses at the opening bell on Tuesday,” commented James Hughes, chief market analyst at Scope Markets. “Those Consumer Inflation expectations yesterday fell short of expectations, hinting that the Fed might have a little more wiggle room than had previously been thought, so Fed Chair Powell’s speech shortly before the opening bell today will be under close scrutiny for any further clues over policy.”
Powell’s comments come ahead of Thursday's US consumer prices inflation data, which is expected to show CPI easing to an annualised increase of around 6.5% in December from 7.1% in November.
“The onset of the reporting season in the US this week will add further colour to the performance of the economy on the ground,” added Richard Hunter, head of markets at interactive investor. “With the banks kicking off the season in earnest, there will inevitably be focus on any worsening of demand, particularly in the housing sector, alongside any increase in bad debts as the consumer comes under additional economic pressure.”