After suggesting in prior prepared statements that a significant surge in inflation will recede, US market indices dropped down from record highs on Wednesday as Federal Reserve Chairman Jerome Powell began two days of testimony. The Fed chairman also stated in his written statement to Congress that, while the job market is improving, it still has a long way to go in terms of recovery from the pandemic. Powell is scheduled to testify before the House Financial Services Committee at 12 p.m. Eastern.
Investors will also be looking at another set of quarterly results from the country’s top banking institutions, as well as a reading of the June producer-price index, which rose 1% last month. What is the current state of stock benchmarks?
After momentarily turning negative, the Dow Jones Industrial Average DJIA, +0.13 percent was up 17 points, around 34,905.
After setting a new intraday all-time high at 4,393.68 towards the start of the day, the S&P 500 index SPX, +0.25% traded roughly flat near 4,372.
After trading above its July 12 closing high of 14,733.24, the Nasdaq Composite Index COMP, +0.21 percent was down 9 points, or less than 0.1 percent, near 14,669, after trading above its July 12 closing high of 14,733.24.
The Dow Jones Industrial Average dropped 107.39 points, or 0.3 percent, to 34,888.79; the S&P 500 index dropped 15.42 points, or 0.4 percent, to 4,369.21; and the Nasdaq Composite dropped 55.59 points, or 0.4 percent, to 14,677.65. The Russell 2000 index RUT, -1.05 percent of small-capitalization companies fell 1.9 percent. What is the market’s driving force? On Wednesday, concerns regarding monetary policy and inflation resurfaced after the June producer-price index came in higher than predicted, suggesting that inflation is rising as the economy recovers from the COVID outbreak. According to the government, the PPI increased by 1% last month. The Wall Street Journal polled economists, who predicted a 0.6 percent increase. The PPI report came on the heels of higher consumer price inflation data released on Tuesday, which showed that prices grew 5.4 percent in the year to June, the highest rate since 2008, when oil hit a record high of $150 per barrel. Powell said in prepared remarks for the opening of two days of semiannual congressional testimony Wednesday that “inflation has noticeably increased and will likely continue elevated in the coming months before moderating.” Later Wednesday, the central bank director will testify before the House Financial Services Committee as part of his semiannual economic update to Congress, followed by testimony to the Senate on Thursday. “While attaining the standard of ‘substantial further improvement’ is still a ways off,” Powell said of the labor market, “participants think that progress will continue.” “Job increases should be substantial in the coming months as public health conditions improve and some of the other pandemic-related issues that are currently dragging them down go away,” Powell said. Investors will also be hoping for further information from Powell on when policy interest rates will be raised, as well as plans for unwinding the Fed’s asset-purchase program, which is presently worth $120 billion per month. In a daily note, Sophie Griffiths, market analyst at Oanda, stated, “Needless to say, the markets will be monitoring intently to see if the latest CPI figure has modified the Fed’s stance regarding rising inflation being transitory.” “Any sign that the Fed’s stance is swaying might send stocks tumbling again,” the expert added. The central bankers considered when to cut down asset purchases, according to minutes from the Fed’s most recent policy meeting in June, but no resolution was reached. Powell said in his prepared remarks on Wednesday that the Fed is talking about slowing its bond purchases and that it “will continue these talks in future meetings.” Most Fed members have been unfazed by the increase in inflation so far, with most officials, including Powell, viewing it as likely temporary. The CPI print, according to San Francisco Fed President Mary Daly, is just part of a temporary “pop” in inflation that won’t endure, and the central bank should keep its easy policy stance “steady in the boat.” On Wednesday, corporate profits were also in the spotlight, with BlackRock BLK, -3.55 percent and Bank of America BAC, -3.78 percent both reporting sales and profit that above expectations. Meanwhile, Senate Democrats revealed late Tuesday that they had achieved an agreement on a budget that would spend $3.5 trillion over the next decade, paving the way for President Joe Biden’s push to invest government funds in climate change, healthcare, and family-service programs. Separately on Tuesday, a bipartisan group of senators continued to work on a third bill, which would spend approximately $1 trillion on roads, water systems, and other infrastructure projects, a priority for Biden. Which businesses are being scrutinized?
Bank of America Corp. BAC, -3.78 percent shares slumped 4.7 percent on Wednesday after the moneycenter bank announced a second-quarter profit that exceeded estimates but revenue that fell short, owing to losses in consumer banking and global markets.
BlackRock Inc. BLK, -3.55 percent reported second-quarter profit and revenue that above expectations on Wednesday, with assets under management increasing by 30% and net inflows topping $80 billion.
Eli Lilly & Co. LLY announced on Wednesday that it is purchasing the remaining shares of Protomer Technologies in a deal valued at more than $1 billion based on anticipated development and commercial milestones.
Verso Corp. VRS, a specialty and packaging paper and pulp manufacturer, stated on Wednesday that it had received an unsolicited bid of $20 per share in cash from Atlas Holdings LLC.
After the estimated pricing and quantity of shares to be issued in the California-based Ophthalmology and optometry company’s first public offering were boosted, Sight Sciences Inc. SGHT is now scheduled to go public with a valuation of more than $1 billion.
What about your other assets? How are they doing?
The 10-year Treasury note yield TMUBMUSD10Y, 1.358 percent, slipped 7 basis points to 1.35 percent.
The ICE U.S. Dollar Index DXY, which compares the currency to a basket of six major rivals, fell 0.3 percent.
Oil futures fell slightly, with the US benchmark CL00 down 2.2 percent to $73.57 a barrel. The price of gold futures GC00 increased by 0.7 percent to $1,823 per ounce.
The Stoxx 600 Europe SXXP index of European stocks fell 0.1 percent. The FTSE 100 UKX in London fell 0.5 percent.
In Asia, Hong Kong’s Hang Seng Index HSI declined 0.6 percent, Shanghai’s Composite SHCOMP fell 1.1 percent, and Japan’s Nikkei 225 NIK finished 0.4 percent lower./n
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