4.20pm: NY Fed President says restrictive monetary policy is here to stay
The Dow Jones Industrials Average closed Tuesday down 308 points, or 1.0%, at 31,791, the Nasdaq Composite lost 135 points, or 1.1%, to 11,883 and the S&P 500 dipped 44 points, or 1.1%, to 3,986.
The benchmarks saw red for the third day in a row as investors continued to react to a Federal Reserve that seems increasingly likely to continue hiking interest rates.
New York Federal Reserve President John Williams said Tuesday that the US central bank's hawkish position is unlikely to change anytime soon.
“We’re going to need to have restrictive policy for some time,” Williams said in a live interview with the Wall Street Journal. “This is not something we’re going to do for a very short period and then change course.”
For the moment, traders are looking ahead to Friday's jobs report.
12.05pm: Markets lose morning gains
The three major US indices were down midday, as stronger job opening numbers for July suggest the American economy can handle tougher monetary policies.
At midday, the Dow Jones Industrial Average was down 0.7% to 31,859 the S&P 500 was down by 0.9% at 3,994, while the Nasdaq Composite was down by 1% at 11,889.
Joshua Mahony, senior market analyst at online trading platform IG, said today’s initial gains were met by pessimism despite improvements to consumer and jobs data, a typical case of decent data being dire for stocks.
“With Jerome Powell hammering home the point that monetary policy will be utilised to address inflation rather than potential employment or growth concerns,” Mahony said in a statement.
On the flip side, he noted that US consumers are feeling cheerful.
“Today’s US consumer confidence survey brought a welcome boost for the Fed, with the August reading of 103.2 surprising even the most optimistic forecaster. Despite the evident fears around energy prices and inflation, the survey saw a rise in the number of those that consumers that consider conditions to be ‘good’.”
Mahoney said that, from an employment perspective, the survey saw grounds for continued optimism with just 11.4% of consumers considering jobs ”hard to get.”
“That theme was reiterated by a welcome jump in the JOLT job opening figure, which followed the CB confidence survey by also reversing the three-month downtrend to push sharply higher. Clearly the conditions for many have improved in August, helping to alleviate fears of a downbeat jobs report on Friday,” Mahony said.
At midday, the major movers included Best Buy, up 2.8% after the company reaffirmed its full-year guidance, while First Solar was up 2% and Sherwin Williams was up 1.5%.
On the downside, despite surging 11% higher in the pre-market, Bed Bath and Beyond fell by 5% at midday. Twitter was also down 1.5%, on news that Elon Musk’s lawyers filed a new notice to cease his US$44 billion bid to buy the social media company.
10.48am: Proactive North America headlines:
Facebook lets users post NFTs by connecting crypto wallets
Altaley Mining sees $13.9M in 2Q revenue from sale of 8,194 tons of zinc concentrate with an average of 44.8% zinc and 406 grams per ton silver
Nextleaf Solutions posts fiscal 3Q revenue jump from shift to branded cannabis products company
CleanSpark hashrate exceeds three exahashes following summer of acquisitions
Steppe Gold rapidly advancing Phase 2 expansion at ATO mine, new crusher nearing completio
Québec Nickel reports impressive assay results from step-out drilling at Fortin Sill Zone at its Ducros project in Abitibi
Outlook Therapeutics re-submits biologics license application for ONS-5010 as a treatment for wet AMD to the FDA
Playgon Games reports 2Q revenue jump from new operator wins, boost in player activity
New Age Metals boosts land holdings in lithium-rich Winnipeg River Pegmatite Field
Fobi AI provides Checkpoint digital ticketing system to support Adam Hadwin charity golf tournament
AIM ImmunoTech says study partner Roswell Park begins patient enrollment in Ampligen and resistant melanoma phase 2 trial
Hawkmoon Resources completes summer drill program at Wilson property in Quebec
Valeo Pharma announces appointment of Kyle Steiger to role of senior vice-president and CCO
Tocvan Ventures says it is 'extremely encouraged' by latest drill results from Pilar gold-silver project
Fansunite Entertainment sees 461% jump in 2Q revenue as business units report strong operational results
Braxia Scientific posts 13% rise in Q1 revenue; launches KetaMD in US
Tribe Property Technologies says 2Q revenue rose 9% from year-ago period
Thor Explorations reports 'milestone' second quarter; posts net profit of over US$6M
Victory Square Technologies sees second quarter NAV remain strong at $89.7M
Naturally Splendid Enterprises reports results for six months ended June 30, 2022; announces strategic update
SpotLite360 IOT Solutions posts strong Q2 revenue growth
CULT Food Science highlights key updates in 2022 Bi-Annual Report issued by its portfolio company, Mogale Meat
Givex Information Technology says it has brought on 15 new professional US sports teams as clients in 2022
Arrow Exploration posts second quarter results which show good operating netbacks increases quarter-over-quarter
Veji Holdings posts higher 2Q revenue of $1.2M, continues to engage in strategic business review
Progressive Planet Solutions reports results for full-year ending April 30, 2022, which include revenues and expenses of APL acquired in February
9.35am: ‘Curious’ rally underway
US stocks rallied on Tuesday morning, starting the day in positive territory after a two-day sell-off spurred by monetary tightening fears.
Just after the open, the Dow Jones Industrial Average was up 70 points or 0.2% at 32,169 points, the S&P 500 was up 12 points or 0.3% at 4,042 points, and the Nasdaq Composite had gained 75 points or 0.6% at 12,089 points.
OANDA senior market analyst Craig Erlam observed that today’s rebound following a rocky couple of weeks as investors grew nervous about the economic impact of tightening was “curious.”
“Fed Chair Jerome Powell could not have been more clear on Friday on the central bank's tightening stance and unlike the warnings from his colleagues, the message appeared to have finally gotten through which makes today's move all the more curious,” he said.
“It's not the fact that we're seeing a rebound as equity markets don't move in straight lines, rather it's the strength of it that is interesting.”
He added that, prior to Friday’s speech, investors appeared determined to cast aside warnings in favour of the dovish pivot narrative and today's moves may suggest the same could still be true after a brief pullback.
“With a 75 basis point rate hike now viewed as the more likely outcome from the Fed in a few weeks and ECB officials putting a similar move on the table ahead of its meeting next week, how strong of a recovery can we really expect in equity markets?” Erlam questioned.
6.30am: A slight breather
US stocks were expected to open higher on Tuesday, recovering some of the sharp falls seen over the previous two sessions, as investors look to take in their stride the stark warning from US Federal Reserve chairman Jerome Powell that interest rates will have to continue rising.
Powell signaled on Friday that the fight against inflation has yet to be won and that the Fed rate setters’ main task is to return inflation to its 2% target. As things stand, the headline inflation rate is around 40-year highs above 8%.
Futures for the Dow Jones Industrial Average were up around 0.8% in pre-market trading, while those for the S&P 500 rose 1.0%, and contracts for the Nasdaq 100 added 1.3%.
“The US futures look better this morning, but the market sentiment will likely remain morose after Powell’s clear declaration that the Federal Reserve will have no pity for the markets, and continue tightening its policy until it puts inflation on a sustainable path toward its 2% policy target,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The Dow closed 0.6% lower on Monday after plunging just over 3% on Friday. The S&P 500 and the Nasdaq Composite also registered their sharpest falls since June on Friday and suffered more falls on Monday.
“The S&P500 stepped into the bearish consolidation zone after having cleared a major Fibonacci resistance, the 38.2% retracement on the summer rally. Nasdaq fell another 1% and tested the 50-DMA to the downside, where it found support,” noted Ozkardeskaya.
Some of the heavy selling appears to be easing but the overall downtrend remains intact. Investors are also paying heed to Powell’s words that economic data is holding up well despite the aggressive increase in interest rates and high levels of inflation. The resilience of the wider economy and especially the labor market is strengthening the Fed’s resolve to keep on raising interest rates.
With that in mind, this week’s US non-farm payrolls figure, due on Friday, take on even more importance than usual. Consensus estimates suggest another strong increase of around 300,000 in August, having risen over 500,000 in July.
The market focus today will be on speeches from Richmond Fed President Tom Barkin and New York Fed President John Williams for additional clues as to the path for interest rates in the world’s biggest economy.
Contact the author at jon.hopkins@proactiveinvestors.com