Sherif Adel (Washington)
The words of Jerome Powell, Chairman of the Federal Reserve Bank, did not hide the US stock markets, despite his insistence on confirming that the inflation rate will continue to rise, which may mean more tightening, as the main stock indices rose, recording the first weekly gains in a month that will often be the worst since the beginning of the year.
By the end of trading on Friday, the Dow Jones Industrial Average was up 247 points, representing 0.7% of its value at the beginning of the day, the same percentage as the S&P 500 index, while the rise in the Nasdaq index, which is usually most affected by interest rate changes, reached 0.9%.
While the S&P 500 and Nasdaq stopped the series of weekly declines after the third week, the Dow Jones index continued its decline for the second week in a row.
Despite acknowledging the progress made by the bank in reducing inflation, Powell warned, on Friday, that the country’s inflation rate would remain above the target level, estimated at 2 percent, indicating that there may be more cycles of raising interest rates in the future, which caused a decline in stock indices. for a while while he spoke.
“Although inflation has come down from its peak, which is a welcome development, it is still very high,” Powell said, in prepared remarks at the annual gathering of central banks in Jackson Hole, Wyoming. He added, explaining that the Fed is ready to raise interest rates more if necessary, in order to maintain monetary policy at a constrained level, until it is assured that inflation is moving sustainably in the right direction. However, Powell’s speech was not all bad for the markets and investors, as he gave them some hope when he affirmed his confidence in the continuation of strong economic growth in the United States. Powell pointed out that “consumer spending was particularly strong” and that there were “early signs of a recovery in the housing market” in the world’s largest economy, prompting major stock indices to begin their upward journey before Friday’s mid-term trading session.
Powell did not give a clear indication of the direction of interest rates during the coming period, but Quincy Crosby, market expert at LPL Financial Consulting, considered that the path of US Treasury bond yields will be the main determinant of market trends during the remainder of the year.
“No matter what causes bond yields to go up, it drives up the cost of financing, because the cost of capital goes up,” Crosby noted.
The 10-year Treasury yield, seen as the most important in the US market, fell on Friday to 4.233%, after peaking earlier in the week.
2023-08-27 23:37:53
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