CHANGING THE SCRIPT. . .

Hmmm shall we keep on guessing. . .

✓ 5 DAYS INTO MAY 2022

What a difference a day makes.

Fresh off the best percentage gain for the Dow Jones Industrial Average DJIA, -3.03% since Nov. 9, 2020, the blue-chip index got clobbered, along with the rest of the stock market, including the S&P 500 SPX, -3.37% and the Nasdaq Composite COMP, -3.94%.

Not even U.S. Treasurys were safe, with the 10-year Treasury note TMUBMUSD10Y, 3.034% climbing above 3% as prices fall.

Some experts attributed Wednesday’s rally to a statement by Federal Reserve Chairman Jerome Powell that a 75-basis-point increase wasn’t being actively considered by policy makers at the central bank at coming meetings

✓ 2 Hours ago

Powell mentioned inflation almost 44 times in his Jackson Hole Economic Policy Symposium 2022 speech.

Wall Street saw a big meltdown when Dow 30 index plummeted over 1000 points and Nasdaq Composite ended the day’s session 4% lower. The market pain was as a result of the warning Federal Reserve Chair Jerome Powell gave to households and businesses during his Jackson Hole Economic Policy Symposium 2022 speech.

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” said Powell during the Jackson Hole Economic Policy Symposium 2022 speech.

Also Read: Warren Buffett’s Berkshire Hathaway share price is Rs 3.48 crore! Own a portion with as little as Rs 5000

The slump in stock prices in the US stock market came after Federal Reserve Chair Jerome Powell during his Jackson Hole Economic Policy Symposium 2022 remarks. Powell in his Jackson Hole said that Fed will keep raising interest rates to bring inflation down.

Without beating around the bush, Powell kept referring to inflation as the sole reason for hurting the economy. Inflation was mentioned almost 44 times in his speech.

“US Fed statements post the Jackson Hole symposium indicated the central bank’s strong commitment towards controlling inflation over growth. In cues for major central banks across the world, Fed Chair Jerome Powell said that inflation is likely to remain higher for longer period and thus require aggressive stance. This is likely to be negative for equity markets. The impact was clearly visible in US markets which fell more than 3%,” says Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

US stocks finished lower, with S&P 500 clocking its worst daily performance since June and its second straight weekly loss. As investors realized that a Federal Reserve pivot is not a possibility in the near future, the stocks tanked and ended the week lower.

Also Read: Will US Fed go for 50 bps or 75 bps points hike in the FOMC meeting in September?

“Comments from FED chair disappointed and would shift from raising rates to lowering sometime next year. Friday’s selloff capped off two consecutive weeks of losses for major stock indexes and largely wiped out the market’s gains since late July. The Federal Reserve will continue raising interest rates and hold them at a higher level until it is confident inflation is under control and at the 2% level. Slackness in the rate of investment, spending and hiring will be the unfortunate costs of reducing inflation,” says Mitul Shah- Head of Research at Reliance securities.

Jobs data and US CPI numbers are expected soon and could throw up a major reversal for the stocks if the tide has to shift upwards. The September FOMC will, therefore, become an important event to watch out for.

The belief that there will be more rate increases does not change despite the better-than-expected CPI reading in July. The Fed is more likely to raise its policy rate by 50 basis points in September as opposed to another significant 75 basis point increase given the positive tone of the July inflation statistics.

The target range for the federal funds rate will be 3.50–3.75% at year’s end, according to BofA’s projection, which is still calling for 50bp increases in September and November, followed by a 25bp increase in December. But, till the time, Fed continues to hike rates and a negative impact is visible on the economy, investors could be rushing out of stocks and bonds alike.

✓ EXCELLENT REPORT 2 Hours ago

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Aug 27, 2022,08:00am EDT|

recession is around the corner, but Fed Chair Powell has grown increasingly cautious in warning of the economic consequences of higher interest rates.

Topline

Though they had recently cooled, fears of an impending recession once again escalated Friday after Federal Reserve Chair Jerome Powell warned economic growth will suffer as the central bank works to ease decades-high inflation—driving a steep stock market decline as more experts worry that even the recently strong job market could soon start to show signs of weakening.

Key Facts

In his highly awaited Jackson Hole speech on Friday, Powell hawkishly proclaimed the Fed would "forcefully" use its tools to combat inflation and cautioned doing so will require a "sustained period of below-trend growth" that will "bring some pain to households and businesses."

Powell didn't mention the likelihood of Fed policy causing a recession, but in emailed comments Friday, Oanda analyst Ed Moya says the speech showed the Fed is "committed to restrictive policy that will eventually get this economy into a recession" in order to cool inflation that has remained near 40-year highs for the majority of this year.

"The Fed is flipping the script," says Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, noting the central bank long supported the market with low interest rates and accommodative policy during the pandemic but now emphasizes price stability—shifting its focus as it did before the Great Recession.

Others agree: Cliff Hodge, the chief investment officer at Cornerstone Wealth, says Powell's speech "unequivocally implies" the Fed is okay with risking a recession in order to lower inflation and raises the odds of one occurring over the next year.

On Friday afternoon, economists at Goldman Sachs said the speech doesn't make them believe the Fed will become more aggressive with its policy but that risks remain "tilted to the upside"; they place the odds of a recession over the next year at one in three, but others, including Nomura, believe one will start later this year.

Labor Market

Powell on Friday acknowledged there "will very likely be some softening" in the labor market as the Fed works to bring down inflation. Despite widespread reports of layoffs and hiring freezes, the economy posted impressive job growth for July, with more than half a million jobs added. In a Wednesday note, Goldman economists projected the recent weakness will start to reflect in coming reports and said they expect job openings in particular to only "fall further." According to PwC, about 50% of U.S. executives are considering or planning on cutting jobs within the next six to 12 months.

Stock Market

Stocks abruptly fell after Powell's speech on Friday, cutting into a roughly 15% gain since the Fed's rate hike in June—when many investors concluded the worst of the increases may be over. "If the Fed is going to raise interest rates until the U.S. enters recession, then the stock market needs to be down 20% to 30% from its prior peak," says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. After climbing 21% last year, the S&P is down nearly 15% this year.

Housing Market

New home sales fell far below expectations in July, plummeting nearly 13% to the lowest level since January 2016, according to data released Tuesday. Last week, home builders and realtors declared a recession in the housing market, as higher home prices and mortgage rates continued to sideline potential buyers and push demand to the lowest level since the turn of the century.

Inflation

Not even further good news on the inflation front was good enough to calm investor fears. The Fed's most closely watched inflation indicator, the personal consumption expenditures price index, cooled at the slowest pace in more than a year last month, according to Friday morning data, performing much better than economists projected.

The Fed

Thus far, the central bank has hiked interest rates by 2.25 percentage points this year. Goldman says the majority of hikes are behind us and predicts only a 50-basis-point rate hike in September and 25-basis-point increases in November and December. On Friday, however, Powell kept the door open for another 75 basis-point hike, and more aggressive activity would surely rattle markets.

Dow closes down more than 1,000 points Friday

The Dow Jones Industrial Average dropped 1,008.38 points, or 3.03%, to 32,283.40, after accelerating losses into the close. The S&P 500 fell 3.37% to 4,057.66, and the Nasdaq Composite slid 3.94% to 12,141.71.

The major averages declined for a second week. The Dow slid 4.2%. The S&P 500 and Nasdaq Composite lost roughly 4% and 4.4%, respectively.

— Sarah Min

S&P 500 erases August gains

The S&P 500′s drop of more than 3% on Friday has brought the index to roughly 4,067.

If that holds, it will be the S&P 500′s lowest close since 4,023.61 on July 27.

The market’s struggles over the past 10 days erased some solid rallies earlier in August. The index closed at 4,305.2 on Aug. 16 but has lost more than 5% since then.

—Jesse Pound

Energy is the big winner of the week

Energy is the one bright spot in the market this week, with the S&P 500 energy sector rallying more than 5% so far this week.

The sector, down on Friday amid the market selloff, is the only positive one for the week. Higher oil prices helped propel the stocks higher, with West Texas Intermediate crude up 1.7% this week.

The biggest winner is APA Corp, up 10.9% since Monday.

CNBC Pro subscribers can read the full story here.

— Michelle Fox

Here are some of the biggest movers on Friday

Powell's hawkish tone bad for stocks, Senyek says

Federal Reserve Chairman Jerome Powell's Friday speech was more hawkish than anticipated, weighing on stocks, according to Chris Senyek of Wolfe Research.

"A more hawkish tone was largely expected coming into his speech this morning," Senyek wrote in a Friday note. That said, the market is interpreting his tone as even more hawkish than those expectations.

After Powell's remarks, both yields on the U.S. two-year treasury and the March 2023 fed funds future were up by roughly 0.5%, and stock slumped. Going forward, it's likely that stocks will continue to trade down according to Senyek.

"This speech is likely to keep downward pressure on equity markets, with the "Growth" trade and "long-duration" subsectors & stocks getting hit hardest… think a reversal of the trade since mid-June," he wrote.

Senyek also reiterated his bearish stance on stocks. Going forward, he sees inflation readings and other economic data as the largest market drivers through the end of the year.

"We continue to believe that (1) core inflation is going to be a thorn in the Fed's side and prove to be very persistent, and (2) headwinds from Fed tightening have only just started to show up in economic readings and a demand-driven recession is going to hit at the end of this year or beginning of next year," he said.

—Carmen Reinicke

NYSE decliners outpacing advancers in market sell-off

Roughly six stocks at the New York Stock Exchange fell for every advancer Friday, as the market sold off following Fed Chair Jerome Powell's highly anticipated speech. At the S&P 500 level just 15 names traded higher.

Powell reiterates Fed will continue to raise rates to fight inflation

Fed Chairman Jerome Powell reiterated that the central bank will continue raising rates to subdue inflationary pressures. He also warned, however, there may be "some pain" ahead as these measures take hold.

"Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy," Powell said in a speech at a Jackson Hole, Wyoming symposium.

—Fred Imbert, Jeff Cox

MesaZona > Table of Contents : Here's The Menu. Enjoy

27 August 2022