Wall Street on tiptoe, while anticipation is building for the speech to be delivered today by the chairman of the Federal Reserve, Jerome Powell, at the Economic Club of Washington.
Powell, according to Reuters reports, will speak at 12.40 pm Washington time, 6.40 pm New York time.
The Dow Jones Industrial Average fell 34.99 points (-0.1%) yesterday, down for the third consecutive session; the S&P 500 lost 0.61%, while the Nasdaq Composite fell 1%.
The jump in US Treasury yields weighed on: 10-year government bond yields jumped yesterday to 3.619%, a record since January 10, while 1-year Treasury yields soared to 4.841%, the record since January 6th. Yields on two-year Treasuries also reached their highest value since 6 January, shooting up at 4.412%. While awaiting Jerome Powell’s speech, Treasury rates are barely moved.
Meanwhile, in an interview with CNBC, Minneapolis Federal Reserve Chairman Neel Kashkari said explosive US job growth in January showed the US central bank still had a lot of work to do. to do in its battle to scuttle inflation.
In this regard, Kashkari admitted that he still believes that US fed funds rates must rise from the current level to which they were brought last Wednesday, a range between 4.5% and 4.75%, up to 5.4% %. The Fed, Kashkari stressed, has not cooled inflation enough to “declare victory.”
“We have a job to do. We know that raising rates can
put a stop to inflation – said the banker, in an interview with CNBC’s “Squawk Box” – We must raise rates aggressively to contain inflation, and then allow monetary policy to do its job ”. Not comforting words, which bring back to Wall Street the specter of aggressive monetary tightening, in a context in which the American economy continues to appear all too solid.
Fears about further aggressive rate hikes were rekindled with the publication of the no-farm payrolls report last Friday.
The U.S. jobs report found that the U.S. economy created as many as 517,000 new jobs last month, well above consensus-expected growth of 185,000 new payrolls, and at a much stronger pace than even the 223,000 new jobs. jobs created in December.
At about 4 pm Italian time, the Dow Jones dropped 0.34%, the S&P 500 fell 0.17% and the Nasdaq showed a change of +0.05%.
Last week, it was Powell’s words that sparked the buying on Wall Street, with investors giving a dovish interpretation to his statements.
Powell spoke at the press conference following the announcement by the Fomc, the monetary policy arm of the Fed, that on Wednesday February 1st announced the decision to raise US interest rates by 25 basis points, to the new range between 4.5% and 4.75%, a record since October 2007.
On the corporate front, great excitement on what seems to be confirmed as the great theme of 2023: artificial intelligence.
In the last few hours, Microsoft has confirmed the launch of an event, scheduled for today which, according to some sources, could be connected to OpenAI’s ChatGPT AI chatbot, on which the US software giant is focusing.
Yesterday, Google officially launched its challenge to ChatGPT by announcing its Bard chatbot, and Chinese giant Baidu, also known as Chinese Google, did the same.
On the Hong Kong stock exchange, Baidu’s stock has soared by more than 15%, flying to all-time highs since mid-February 2022.
Alphabet, the holding company of which Google belongs, marks a slight increase after yesterday’s loss, despite the announcement of the AI chatbot Bard.
Baidu stock, also traded on the New York Stock Exchange, flies by 11%, while Microsoft advances by around 1.83%.
Returning to the trend on Wall Street, Karl Chalupa, CEO of Gamma Investment Consulting, warned – according to what CNBC reported – that Corporate America’s profits could worsen further, due to the slowdown in the economy during the year.
Chalupa also noted that, in the last 60 years, there has been no recovery from the low tested by bear market markets except with shares returning at least to their fair value.
“On average, new bull markets came when stocks were 25% undervalued.” And, “at current valuations, the S&P 500 would need to fall below the 3,500 mark to reach its fair value. Furthermore, for a decline of up to -25%, the S&P 500 should fall close to the lows tested during the Covid of 2,200,” noted Chalupa.