Medicare Agent News: The Fed Keeps Pushing Back

Wednesday, February 22, 2023

The Fed Keeps Pushing Back

By Lawrence C. Strauss Thursday, February 16

More Fed Worries. Stocks dug a hole in early trading Thursday, regained some ground but ended the day well into negative territory.

The Federal Reserve -- and how long and how high it will further boost short-term interest rates -- continues to hang over stocks.

New comments from several Fed officials didn't help markets Thursday.

Cleveland Fed President Loretta Mester said Thursday there was a strong argument for raising interest rates by 50 basis points, or a half percentage point, at the central bank's last meeting given the strength of economic demand and persistently high inflation pressures.

On Feb. 1 the Fed announced a 25 basis point increase.

St. Louis Fed President James Bullard said he also advocated a 50 basis point rate hike at the central bank's meeting earlier this month.

The Dow Jones Industrial Average ended the day down 1.3%. The Nasdaq Composite, which tracks technology stocks, slid by 1.8%. And the S&P 500 lost 1.4%. All eleven S&P sectors were in the red.

Barron's Angela Palumbo and Jack Denton report that several data points, including first-time unemployment claims and wholesale inflation, triggered more worries about inflation and how the Fed will react:

Labor data released Thursday showed that the number of Americans filing for first time unemployment claims last week was 194,000, which was below economists’ estimates of 200,000, according to FactSet. The Fed has been looking for a loosening of the labor market to help fight off inflation. Thursday’s data shows the labor market is still strong.

The producer price index, which measures wholesale inflation, slowed to 6% in January from last year, a decline from December but still hotter than economists expected. This data followed news earlier this week that consumer prices declined less than economists were expecting.

In an email, John Lynch, chief investment officer at Comerica Wealth Management, said that the implications of the PPI data and the recent consumer price index report include "a steadfast Federal Reserve, with tighter policy, and for longer, than equity markets have been pricing in since October."

Treasury yields have recently risen sharply, an indication that the bond market is concerned about inflation and the Fed's need to raise rates higher than previously expected.

But Treasury moves were fairly muted on Thursday. The yield on the two-year Treasury, which partly reflects where the market anticipates short-term rates will settle, was down slightly to close at 4.617%. However, it's made a big gain since early February when it was a little below 4.1%. Bond yields and prices more inversely.

The 10-year Treasury's yield was up about 4 basis points to close at 3.842%.

Elsewhere, shares of Tesla slid by nearly 6% Thursday after news emerged that the electric-vehicle maker is recalling cars equipped with its highest level self-driving software. Al Root of Barron's has more on Tesla here.