Stocks Turn Higher as Jay Powell points to strength of US economy
2:59 pm Wednesday, June 22nd, 2022
The prevailing trend this year has been to sell into strength. That is exactly what happened at the start of today’s trading. Hot on the heels of Tuesday’s rebound effort, the S&P 500 declined 1.3% at the open while the Nasdaq Composite dropped 1.2%.
It wasn’t long, however, before the major indices were all back in positive territory as the inclination to sell into strength was quickly repelled by a willingness to buy into the weakness. That is a potentially important tonal shift, especially since it occurred while Fed Chair Powell was reminding the Senate Banking Committee in his Semiannual Monetary Policy Report that the Fed is “strongly committed to bringing inflation back down, and we are moving expeditiously to do so.”
Additionally, in the Q&A portion of his testimony, the Fed Chair conceded that it will be challenging to achieve a soft landing.
That view did not surprise the stock market, which has been trading for some time now with a palpable fear of the Fed making a policy mistake. The absence of any “new” perspective seemingly helped the rebound effort as there wasn’t a new source of rate-hike angst with which to contend.
The latter point notwithstanding, the capital markets are still contending with broader growth concerns driven by policy tightening efforts among many of the world’s leading central banks.
Although the Dow, Nasdaq, and S&P 500 are sporting gains at this point, growth concerns can be seen across the market landscape.
WTI crude futures are down 3.1% to $106.14/bbl and copper futures are down 2.2% to $3.95/lb.
The 2-yr note yield is down 15 basis points to 3.07% and the 10-yr note yield is down 16 basis points to 3.15%.
Market breadth favors advancers over decliners by a slight margin at the NYSE and Nasdaq.
Today’s lone economic release was the weekly MBA Mortgage Applications Index. It showed a 4.2% jump in applications, led by an 8% increase in purchase applications, which were fueled by interest in adjustable rate mortgages. Fed Chair Powell will be back on Capitol Hill Thursday for day two of his testimony with a 10:00 a.m. ET appearance before the House Financial Services Committee.
