May 16, 2022

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US stocks open lower, bond yields stabilize after Powell hawkish comments

US stocks open lower, bond yields stabilize after Powell hawkish comments

US stocks opened lower and the sell-off in government bonds settled on Friday, after the latest indication that the Federal Reserve will tighten monetary policy aggressively to fight inflation.

The S&P 500 fell 0.8% after the opening bell, while the heavy Nasdaq Composite was down 0.3%. The Dow Jones Industrial Average was down 393 points, or 1.1%. On Thursday, the major US stock indexes It ended with losses. All three indicators were recently on their way to ending the week in the red.

The sharp rise in government bond yields this week showed signs of stabilizing, with the 10-year Treasury yield hovering at 2.910% after closing at 2.917% Thursday. Earlier on Friday, yields rose before reversing course. Yields rise when bond prices fall.

Concerns about inflation and the pace of monetary tightening by the Federal Reserve remained at the forefront of investors’ minds this week and helped drive volatility in major stock indexes. On Thursday, Federal Reserve Chairman Jerome Powell gave investors a clear signal that the central bank is doing just that Willing to tighten monetary policy more quickly It indicated that it is likely to raise interest rates by half a percentage point at its meeting in May.

Next month rate hike, after the Fed A quarter of a percentage point increase in MarchIt will be the first time since 2006 that the central bank has raised the interest rate in successive meetings.

Powell’s comments led to fresh volatility in the stock market that has been battered this year The war in Ukrainesoaring inflation and Covid-19 cases rise in China. Many traders are now concerned that the Fed’s tightening cycle could push the economy into recession as consumers are already feeling uneasy about the economy. Next week, investors will analyze new numbers from the University of Michigan on consumer confidence in April.

Federal Reserve Chairman Jerome Powell indicated Thursday that the central bank is likely to raise interest rates by half a percentage point at its May meeting. Photo: Samuel Corum / Getty Images

On Friday, data from the UK’s Office for National Statistics showed signs of consumer volatility. UK retail sales volumes fell sharply last month, weakening by 1.4%. This sent the British pound down 1.1% against the dollar to its lowest level since 2020. The London FTSE 100 index fell 0.7%.

“I think what you’re seeing is that consumers are becoming more reluctant,” said Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdown. It is a tough tightrope that central bank policy makers have to walk now. They need to put a lid on the boiling inflation pot, but they don’t want to take the steam out of the economy completely.”

However, for now, investors are encouraged by strong first-quarter earnings. Among the companies that have reported so far, 80% have exceeded analyst expectations. This helped provide some stability to the US stock market.

Airlines shares rose.

United Airlines Holdings

added 3.8% and

American Airlines Group

3.9% profit. On Thursday, an American said Sales hit a record high in Marchthe first month since the pandemic began that the company’s total revenue exceeded 2019 levels. The United said it was able to pass on the increase in fuel prices to consumers.

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American Express

It fell 1.1% after the credit card company reported first-quarter net income of $2.10 billion, down from $2.24 billion a year ago, even as spending on travel and entertainment rose.

Kimberly Clark

It jumped 8.8% after Huggies diapers and Cottonelle raised their sales growth forecast for 2022 and said first-quarter sales increased compared to the previous year.

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HCA Healthcare

It is down about 15% after the hospital chain cut its guidance for the year. The company said first-quarter volume and revenue were offset by higher-than-expected inflationary pressures on labor costs.

Stocks on Wall Street fell on Thursday after Federal Reserve Chairman Jerome Powell indicated that the central bank will raise interest rates by half a percentage point at its next meeting.


picture:

Courtney Crowe/The Associated Press

In commodities, Brent crude, the international oil standard, fell 1.1% to $106.83 a barrel.

In the currency markets, the ICE US Dollar Index, which measures the currency against another basket, rose 0.4%, on pace for gains this week. including friday, cursor rose For all but two sessions in April, thanks to geopolitical concerns and looming increases in interest rates by the Federal Reserve.

In overseas markets, the Stoxx Europe 600 continental index fell 1.4%, dragged down by technology companies including German software companies SAP and

TeamViewerAnd

which fell 3.4% and 3.8%, respectively. In contrast, the Swiss cement maker

Holcim

It rose 4.8% after the company reported sales growth and raised its forecast for the year.

In Asia, Hong Kong’s Hang Seng fell 0.2% and Japan’s Nikkei 225 fell 1.6%. In contrast, the Shanghai Composite Index bucked the trend, up 0.2%.

– Hardika Singh contributed to this article.

Write to Caitlin McCabe at [email protected]

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