Stocks gain, bonds drop after Powell’s reassurance
BNN Bloomberg
Stocks climbed, while bonds fell after Jerome Powell reassured investors that the Federal Reserve remains committed to fighting the fastest inflation in 40 years with rate hikes, despite uncertainties caused by the geopolitical turmoil.
Stocks climbed, while bonds fell after Jerome Powell reassured investors that the Federal Reserve remains committed to fighting the fastest inflation in 40 years with rate hikes, despite uncertainties caused by the geopolitical turmoil.
His remarks spurred a broad-based equity rally, with financial, industrial and commodity companies leading gains in the S&P 500. The Russell 2000 index of small caps rallied 2 per cent. The two-year Treasury yield -- which is more sensitive to imminent policy moves -- hovered near 1.5 per cent. The Fed chief said he was inclined to back a quarter-point hike in March, while adding that he’s open to “series of rate increases” in 2022. Oil pared its rally after earlier topping US$110 a barrel.
Fed Bank of St. Louis President James Bullard called for a “rapid withdrawal of policy accommodation” and emphasized officials must follow through with hikes and a balance-sheet runoff or risk damaging the central bank’s credibility. His Chicago counterpart Charles Evans said monetary policy is currently “wrong-footed” and needs to be upwardly adjusted toward neutrality. Former U.S. Treasury Secretary Lawrence Summers said the next U.S. recession will likely be caused by the Fed, which is “way behind the curve” and would ultimately need to tighten policy by more than what financial markets currently envisage.
President Joe Biden, who used his first State of the Union address to label Vladimir Putin a “dictator,” signaled Wednesday that he’s open to imposing restrictions on oil and gas imports to the U.S. Russia’s military advance continued, with its Defense Ministry saying it captured the Black Sea port city of Kherson as units moved further into southern Ukraine. For its part, Ukraine said a second round of talks were possible as early as Wednesday.
The ruble headed for a third day of losses, sinking as low as 110 per dollar, as Russia pressed on with its invasion of Ukraine and foreign currency sales by companies failed to stem the retreat. U.K.-listed depositary receipts of Russian companies are evaporating in value as sanctions take effect. The Dow Jones Russia GDR Index, which tracks London-traded Russian companies, has plunged 98 per cent in two weeks. The slump has wiped out US$572 billion from the market value of 23 stocks, including Gazprom, Sberbank of Russia and Rosneft, according to Bloomberg calculations.
In U.S. corporate news, Citigroup Inc. said profitability will fall as the bank pursues a strategy shift that will raise expenses in the near term. Nordstrom Inc. soared after the retailer’s sales and guidance topped expectations. Ford Motor Co. will separate its electric-vehicle operations from its legacy combustion-engine business in a historic reorganization of the 118-year-old company.
