US stocks rise as Powell sees path back to 2% inflation while maintaining a strong labor market

US stock indexes edged higher after a shaky start on Wednesday, potentially allowing Wall Street to gain ground after consecutive losses as investors brace for central bankers’ remarks and worries that rising inflation in the largest economy harms the world.

How are stock indices traded?
  • The Dow Jones Industrial Average DJIA
    rose 196 points, or 0.6%, to 31,143.

  • The S&P 500 SPX
    rose 15 points, or 0.4%, to 3,836.

  • The Nasdaq Composite COMP
    rose 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 fell 3%. All three posted their worst daily percentage declines since June 16, according to Dow Jones Market Data.

What moves the markets?

Federal Reserve Chair Jerome Powell told a European Central Bank forum on central banking on Wednesday that he saw a way back to 2% inflation while maintaining a strong job market, but warned there was “no guarantee that we can do it.”

Investors also listened to Christine Lagarde, President of the European Central Bank, Andrew Bailey, Governor of the Bank of England, and Augustin Carstens, Head of the Bank for International Settlements.

Turning to US economic data, Q1 GDP was revised to show a 1.6% contraction compared to the previous 1.5% contraction.

Stocks limped towards the end of a miserable first half of the year. The S&P 500 is down 19.6% so far in 2022 as it was hit by concerns that inflation rates at household highs are severely affecting household sentiment and that the Federal Reserve’s response to rising prices is hurting the economy in a recession could plunge.

Read: How is the stock market going after the worst first half of the year since 1970? Here’s the story.

On Tuesday, the Conference Board’s June Consumer Confidence Index fell to a 16-month low of 98.7, with consumer outlook on the state of the economy the most cautious in almost 10 years. The news helped turn early gains for Wall Street into heavy losses, with the Nasdaq Composite down 3%, taking the tech-heavy index down 28% year-to-date.

“Last week US stock markets rallied on the obscure logic that a US recession would mean lower Fed interest rates and were therefore bullish on stocks… This premise was supported 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 a potential upside potential of 43% as we enter the second half of 2022

On Tuesday, “even weaker consumer confidence data from the US Conference Board provoked the opposite reaction, with US stocks plummeting,” he added.

Wall Street’s fall sent Asian and European stock markets reeling. 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 tough COVID-19 policies are “right and effective.”

Comments heightened concerns that tight supply in China could exacerbate global inflationary pressures. And such concerns were highlighted in Spain on Wednesday, where data showed prices rose 10.2% in June, the fastest pace in 37 years. Europe’s Stoxx 600 XX:SXXP
fell 0.8%.

Oil prices rose, with WTI Crude CL,
up 1.5% to $113.41 a barrel.

The yield on the US 10-year Treasury Bond BX:TMUBMUSD10Y
down 1.3 basis points to 3.167%.

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

  • Bed Bath & Beyond Inc.
    Shares fell 18.7% after the company announced disappointing first-quarter results and the ouster of its CEO, Mark Tritton.

  • General Mills Inc.
    Stocks rose 4.7% after beating quarterly expectations. The company reported net income of $822.8 million, or $1.35 per share, in the fourth quarter, nearly double the last year’s $416.8 million, or 68 cents a share. Adjusted earnings per share of $1.12, ahead of FactSet consensus of $1.01 per share.

Other assets
  • The ICE US Dollar Index DXY
    down 0.01%.

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

  • August Gold Futures GCQ22
    rose $6.30, or 0.4%, to $1,827.90 an ounce.