U.S. stocks push higher as Powell sees path back to 2% inflation while sustaining strong labor market

U.S. stocks push higher as Powell sees path back to 2% inflation while sustaining strong labor market

U.S. stock indexes pushed higher after a wobbly start Wednesday, leaving Wall Street potentially on to gain ground after back-to-back losses, as investors tune in to remarks by central bankers while fretting that soaring inflation is damaging the world’s biggest economy.

How are stock indexes trading?
  • The Dow Jones Industrial Average
    DJIA
     was up 196 points, or 0.6%, at 31,143.

  • The S&P 500
    SPX
     traded up 15 points, or 0.4%, at 3,836.

  • The Nasdaq Composite
    COMP
    gained 42 points, or 0.4%, to 11,223.

On Tuesday, the Dow fell 491.27 points, or 1.6%. The S&P 500 fell 2% and the Nasdaq Composite dropped 3%. All three booked their worst daily percentage declines since June 16, according to Dow Jones Market Data.

What’s driving markets?

Federal Reserve Chair Jerome Powell said Wednesday at a European Central Bank forum on central banking that he sees a path back to 2% inflation while sustaining strong labor market, but warned there was “no guarantee that we can do that.”

Investors were also listening to remarks from European Central Bank President Christine Lagarde, Bank of England Gov. Andrew Bailey and Augustin Carstens, head of Bank for International Settlements, to speak at speak at the same conference.

On U.S. economic data, the first-quarter GDP was revised to show an 1.6% decline, compared with the prior 1.5% drop.

Equities were limping toward the end of a miserable first half of the year. The S&P 500 is down 19.6% so far in 2022, hit by concerns that inflation rates at multidecade highs are badly damaging household sentiment and that the Federal Reserve’s response to surging prices may tip the economy into recession.

Read: What’s next for the stock market after the worst 1st half since 1970? Here’s the history.

On Tuesday, the Conference Board’s consumer-confidence index dropped in June to a 16-month low of 98.7, with consumers’ outlook on the state of the economy at the most cautious in nearly 10 years. The news helped turn early gains for Wall Steet into heavy losses, with the Nasdaq Composite shedding 3%, leaving the tech-heavy index nursing a loss of 28% for the year to date.

“Last week, U.S. equity markets rallied on the back of the arcane logic that a U.S. recession would mean a lower terminal Fed funds rates and thus, was bullish for stocks… That premise was boosted by weak Michigan Consumer Sentiment data,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

See: Wall Street’s favorite stock sector has potential upside of 43% as we enter the second half of 2022

On Tuesday, “even weaker U.S. Conference Board Consumer Confidence data provoked the opposite reaction, with U.S. stocks plummeting,” he added.

Wall Steet’s dive left Asian and European bourses floundering. Hong Kong’s Hang Seng
HK:HSI
fell 2% and the Nikkei 225
JP:NIK
in Japan slipped 0.9%. China’s Shanghai Composite
CN:SHCOMP
shed 1.4% after President Xi Jinping reiterated that the regime’s strict COVID-19 policy was “correct and effective.”

The comments added to worries that supply constraints in China could exacerbate global inflationary pressures. And such concerns were illustrated in Spain on Wednesday, where data showed prices rising by 10.2% in June, their fastest pace in 37 years. Europe’s Stoxx 600
XX:SXXP
fell 0.8%.

Oil prices crept higher, with WTI crude
CL,
up 1.5% to $113.41 a barrel.

The yield on the U.S. 10-year Treasury note
BX:TMUBMUSD10Y
eased 1.3 basis points to 3.167%.

Companies in focus
  • Shares of Pinterest Inc.
    PINS
    rose 0.2% after the social-media company said co-founder Ben Silbermann is stepping down as chief executive and is being replaced by an e-commerce executive from Google.

  • Bed Bath & Beyond Inc.
    BBBY
    shares fell 18.7% after it announced disappointing fiscal first-quarter results and the ouster of its chief executive, Mark Tritton.

  • General Mills Inc.
    GIS
    shares rose 4.7% after beating quarterly expectations. The company posted fourth-quarter net income of $822.8 million, or $1.35 per share, nearly double $416.8 million, or 68 cents per share, last year. Adjusted EPS of $1.12, ahead of the FactSet consensus for $1.01 per share. 

Other assets
  • The ICE U.S. Dollar Index
    DXY
     edged down 0.01%.

  • Bitcoin
    BTCUSD
     fell 4.6% to trade near $20,120.

  • August gold futures
    GCQ22
    gained $6.30, or 0.4%, to settle at $1,827.90 an ounce.

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