(Bloomberg) — Jerome Powell’s hawkish rhetoric spurs higher Fed interest rate bets, revives recession fears and crushes riskier corners of markets This made Wall Street a reality.
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In his testimony before the Senate, the Federal Reserve boss indicated that officials are ready to accelerate the pace of tightening and raise interest rates to higher levels if inflation continues to heat up. Stocks plummeted, with the S&P 500 below 4,000. The swaps market showed him a half-point gain in March, more likely than a quarter-point move, and the projected peak is currently hovering near 5.6%. Advil and federal funds futures checks. “
In another worrisome development, US 2-year yields completely exceeded 10-year yields on Tuesday for the first time since 1981. A situation in which short-term rates are higher than long-term rates is seen as an inversion of the curve—and often a potential harbinger of a recession—with the dollar up 1%, commodity prices down, and oil prices down since early January. It was the biggest drop.
“Powell just said the quiet part aloud,” said Karrie Cox of eToro. “The economy is doing remarkably well, but that could complicate the Fed’s efforts to keep inflation down. This is not surprising news, but it is a bittersweet memory for the market after such an active rally.”
Comerica Wealth Management’s John Lynch added that the market should take seriously the prospect of the Fed’s policy rate “going higher for an extended period of time.” .
To City Index and Forex.com’s Fawad Razaqzada, Powell sounds more hawkish than some might have imagined, raising ‘concerns about a possible hard landing’ given the slow transmission of monetary policy. Revived.
Some economists take Powell’s remarks as an indication that the Fed is likely to make a bigger move at its March 21-22 meeting, while some market watchers We expect the Fed to raise rates by another 25 basis points. Policy makers will have an opportunity to see an update on employment data and consumer prices for February before they meet again.
According to TradeStation’s David Russell, the next few economic reports could be “success or failure” numbers as they could shape economic forecasts at the Fed’s next policy meeting. BlackRock Inc.’s Rick Rieder said a very tight labor market and persistently high inflation could allow the Fed to raise interest rates this cycle from his current range of 4.5% to 4.75% to 6%. I think it will improve.
“As the Fed has already slowed the pace of rate hikes, we do not currently expect a rate hike to 50bp for the remainder of the rate hike meeting and will remain at 25bp until it eventually stops,” Bookver said. .
Evercore’s Krishna Guha said: “We don’t think March’s 50 is on the odds, but Fed Chairman Powell’s delay in marking the market for the Fed’s stance in response to recent data is a real sign of the slump. I would like to emphasize that we view it as a general risk-off.”
U.S. employment growth has outperformed forecasts for the 10th straight month, the longest streak in decades. It fell short of estimates by an average of 100,000 people a month. That’s the highest number Bloomberg has compiled going back to his 1998 data.
Ahead of Friday’s February jobs report, the forecast was for an increase of 224,000, about half the pace seen in January.
Billionaire Ken Griffin says the Fed needs to raise interest rates even more after Americans suffer ‘traumatic’ levels of inflation and is set for a US recession The founder of Citadel and Citadel Securities said central banks have limited ability to fight inflation with rising interest rates, likening the tool to “taking surgery with a blunt knife.”
This week’s main events:
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Eurozone GDP, Wednesday
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US MBA Mortgage Applications, ADP Employment Change, Trade Balance, JOLTS Jobs, Wednesday
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Federal Reserve Chairman Jerome Powell’s semiannual monetary policy report to the House Financial Services Committee was released Wednesday.
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Canadian interest rate decision, Wednesday
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EIA Crude Stocks, Wednesday
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China CPI, PPI, Thursday
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U.S. Challenger job cuts, first unemployment claims, change in household net worth Thursday
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Bank of Japan rate decision Friday
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US Nonfarm Payrolls, Unemployment Rate, Monthly Budget Report, Friday
Some of the major movements in the market:
stock
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The S&P 500 fell 1.5% at 4pm New York time.
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The Nasdaq 100 fell 1.2%.
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Dow Jones Industrial Average down 1.7%
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MSCI World Index down 1.5%
currency
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Bloomberg dollar spot index rises 1%
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Euro fell 1.2% to $1.0551
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British pound fell 1.6% to $1.1829
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Japanese yen fell 0.9% to 137.15 yen to the dollar
Cryptocurrency
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Bitcoin fell 1.6% to $22,048.83
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Ether fell 1.2% to $1,548
bonds
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10-year Treasury yield rises 2 basis points to 3.97%
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German 10-year yield fell 6 basis points to 2.69%
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UK 10-year yield fell 4 basis points to 3.82%
merchandise
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West Texas Intermediate crude fell 3.8% to $77.41 a barrel
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Gold futures fell 1.9% to $1,818.90 an ounce
This article was produced in partnership with Bloomberg Automation.
— With help from Felice Maranz, Peyton Forte and Isabelle Lee.
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