Cool Hand Powell

By Jeffrey Cane |  Wednesday, July 14 Playing It Cool. Federal Reserve Chairman Jerome Powell showed again why he can be a cool, calming presence, even after two days of unexpectedly hot inflation numbers. In his appearance before Congress today, he pushed back on worries that the recent acceleration in inflation reflected anything other than temporary pressures. The Fed, he said, would maintain its current policies, noting that its standard of “‘substantial further progress” in the economy was “still a ways off.” That appeared to be enough to give investors some comfort, and stocks edged up in the afternoon after choppy trading earlier in the day. The S&P 500 and the Dow Jones Industrial Average both gained 0.1%, while the Nasdaq Composite ended down 0.2%. The Russell 2000 fell 1.6%.  The yield on the 10-year Treasury note fell to 1.356% from 1.415% on Tuesday. The dollar was weaker against major currencies after two days of gains.   The debate over inflation will rage even as Powell and the Fed continue to argue that much of the strength in prices is tied to the reopening of the economy. In his remarks today, Powell also said that “measures of longer-term inflation expectations have moved up from their pandemic lows and are in a range that is broadly consistent with the FOMC’s longer-run inflation goal.” Alexandra Scaggs of Barron’s explains why that comment may add more fuel to the debate: That matters because he highlighted longer-term inflation expectations as an input into central-bank policy decisions. In prior comments, Powell has emphasized officials’ desire “to see actual data,” rather than forecasts, showing rising inflation before the central bank changed its policy stance. “We think inflation expectations are very very important,” Powell said in response to a Wednesday question from lawmakers. “They went down at the beginning of the pandemic, and [then] they moved back up… into a range that is consistent with our 2% inflation goal over time. We watch this very carefully, and we would be very concerned if they moved materially and persistently above 2% and we would react to that.” Second-quarter earnings were also in the spotlight today, with reports from Bank of America, Wells Fargo, Citigroup, and Delta Air Lines among the most prominent. Big Tech got even bigger, as Apple, Alphabet, and Microsoft all closed at records. Apple now has a market value of $2.5 trillion. Peloton Interactive, meanwhile, got a little smaller. The stock fell 5.4% after a Wedbush analyst warned about the company's growth prospects. Energy companies were the big losers in the market action today. Crude oil prices fell 2.8%, to $73.13 a barrel, after OPEC members resolved a standoff with the United Arab Emirates and reached an agreement to increase oil production.

 

DJIA: +0.13% to 34,933.23 S&P 500: +0.12% to 4,374.30 Nasdaq: -0.22% to 14,644.95 The Hot Stock: Wells Fargo +4.0% The Biggest Loser:  Occidental Petroleum -7.5% Best Sector: Consumer Staples +0.9% Worst Sector: Energy -3%