4:17pm: Inflation remains on the minds of investors
The Dow closed Wednesday down 47 points, 0.2, at 30,483, the Nasdaq Composite lost 16 points, 0.2%, to 11,053 and the S&P 500 ticked down 5 points, 0.1%, to 3,760.
Despite an initially promising response on Wall Street to testimony from Fed Chair Jerome Powell, the rally petered out in the afternoon.
“Inflation remains the biggest risk to financial assets, and Jerome Powell has made his position abundantly clear: The Fed will continue to raise interest rates until inflation begins to wane. Until then, a sustainable rally for risk assets is hard to imagine,” wrote Robert Schein, chief investment officer of Blanke Schein Wealth Management, CNBC reported.
12.05pm: Powell’s testimony calms markets
US stocks managed to shake off this morning’s losses at noon after Fed chair Jerome Powell reaffirmed the central bank’s commitment to reining in inflation during his Congressional testimony.
At midday, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were all steady at 30,491 points, 3,762 points, and 11,071 points respectively.
AJ Bell financial analyst Danni Hewson said Wall Street seemed like what it heard in Powell’s testimony with the iron fish which had been smashing confidence now clothed in a soft glove.
“Words like ‘nimble’ and ‘appropriate’ took the sting out of the ‘strongly committed’ as did his assertions that the US economy was fit enough to handle what’s coming down the tracks,” he said. “A crowd of familiar names enjoyed quick bumps up, such as the Nasdaq, with lockdown favourites DocuSign, Netflix and Zoom enjoying a moment in the sun.”
CMC Markets UK chief market analyst Michael Hewson also noted that Powell’s testimony appeared to be helping pull US markets off their lows.
“However, the rally continues to remain fragile as investors weigh up the twin risks of a global slowdown against central banks overplaying their hand and tipping the economy into recession,” he said. “This appears to be a vain hope given that some sort of recession or slowdown is inevitable, whatever central bankers might say publicly. The only question is around the degree of severity depending on where you are.”
11am: Proactive North America headlines:
ACME Lithium advances drilling program at Clayton Valley Nevada lithium brine project
Electra Battery Materials says it is in talks to build new cobalt refinery in Quebec
Guardforce AI (NASDAQ:GFAI) expands Robotics-as-a-Service offerings with new offices in San Francisco and Tokyo
Ayurcann Holdings enters agreement to acquire 100% of Joints and Hustle & Shake for $5.5M
Biocept enters into comprehensive laboratory services agreement with Plus Therapeutics for cancer trial
BioSig Technologies enters deal for Cleveland Clinic to evaluate its PURE EP signal processing platform
The Valens Company (TSX:VLNS, OTCQX:VLNCF) inks exclusive cannabis partnership with Coldhaus Distribution to boost Canadian sales
Mindset Pharma partners with the Centre for Addiction and Mental Health for study comparing its novel compound MSP-1014 with psilocybin
Numinus applies for international patent for psychedelics production process
HighGold (TSX-V:HIGH, OTCQX:HGGOF) Mining announces positive metallurgical test results for the Johnson Tract polymetallic project in Alaska
Usha Resources begins exploration work on Jackpot Lake lithium project; aims to commence drilling in late summer/early fall
GR Silver Mining (TSX-V:GRSL) reports latest drill results, which underline potential of future targets at Plomosas project
Zynerba Pharmaceuticals (NASDAQ:ZYNE) reports positive results from Phase 2 trial of Zygel CBD gel in 22q11.2 Deletion Syndrome
Tocvan Ventures recommences drilling at Pilar gold-silver project in Sonora, Mexico
Lavras Gold is exploring to realize the multi-million-ounce potential of its gold project in southern Brazil
Fireweed Zinc to rebrand as Fireweed Metals Corp to reflect its emergence as a leading critical minerals company
Doubleview Gold closes first tranche of its non-brokered private placement for gross proceeds of $517,991.20
9.35am: US stocks sink after rally
US stocks opened lower on Wednesday with the Fed back in the spotlight as its chair Jerome Powell began his two-day testimony before the Senate Banking Committee at 9.30am ET.
Just after the open, the Dow Jones Industrial Index had shed 331 points at 30,200 points.
The S&P 500 had dipped 43 points at 3,722 points and the Nasdaq Composite had slipped 67 points at 11,003 points.
OANDA senior market analyst Craig Erlam said Wednesday’s stock market falls were a reminder of why investors shouldn’t get excited by bear-market rallies.
“There's a desperation to add substance to the, often sizeable, rallies that pop up in equity markets despite little or no rationale behind them and today is once again a lesson in why we shouldn't bother,” he said. “In much the same way that ‘if it seems too good to be true, it probably is’, if stocks are rallying for seemingly no reason, there probably isn't one.”
Commenting on Powell’s testimony in Congress, Erlam said he expected the “R-word” was likely to come up a lot.
“Naturally, he'll do his best to remain apolitical but I'm not sure investors will be able to ignore so much recession chat,” he said.
6.30am: Brace for more volatility
US markets were expected to open lower on Wednesday, giving back some on Tuesday's rally ahead of US Federal Reserve chair Jerome Powell’s latest testimony before Congress, to be delivered today and tomorrow.
Powell is expected to strike a hawkish note on inflation which has yet to hit its peak, suggesting that trading is likely to remain cautious and volatile, putting an end to the bargain-hunting which shored up equity prices in the previous session.
Futures for the Dow Jones Industrial Average fell 1.5 % in pre-market trading, while those for the broader S&P 500 index shed 1.7%, and contracts for the Nasdaq-100 were down 2%.
While equity markets kicked off the short trading week with a bang, the gains might prove to be fleeting, warned Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The gains may not last as the Jerome Powell’s semiannual testimony could turn the market mood sour again as the Fed Chief is expected to reiterate his strong commitment to fighting inflation even if it means a slower economy and a softer jobs market,” she noted.
Fed policymakers raised interest rates by 75 basis points last week and are expected to keep on hiking rates through the rest of the year. Some believe that the Fed is losing the battle against inflation and that the aggressive rate hikes will instead crimp economic growth and dent corporate bottom lines. Fears that the world’s biggest economy will slip into a recession are also growing.
“(US President)Joe Biden said earlier this week that he doesn’t think the recession is inevitable, but Goldman upped its recession expectation from 15% to 30%, and Morgan Stanley (NYSE:MS) said that the S&P500 must drop another 15-20% to fully reflect the scale of contraction,” noted Ozkardeskaya.
“Therefore, yesterday’s rally in stocks could be another dead cat bounce, and we may see the market painted in red in the following sessions. The US futures are already in the red this morning,” she added.
In energy markets, WTI crude oil futures lost 5% to $104.04 a barrel and Brent crude futures shed 4.5% to $109.03, amid concerns that global economic growth may falter.
Contact the author at jon.hopkins@proactiveinvestors.com