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Stock Market Down After Federal Reserve Chair Issues Warning on Inflation

Stock Market Down After Federal Reserve Chair Issues Warning on Inflation

Sec. Yellen’s announcement that US Treasury is not considering ‘blanket insurance’ for all U.S. bank deposits also a contributing factor.

The stock market went up at opening today, with the hope that the Federal Reserve would soon be halting its interest rate hikes (which are designed to quell inflation).

The Dow, S&P 500, and the Nasdaq rose at the start of the day after Chairman Jerome Powell announced that the Federal Reserve delivered a 25 basis-point interest rate hike.

The three major indexes at first climbed higher as Chair Jerome Powell indicated the Fed might pause its rate hikes due to turmoil in the banking sector.

“We no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate.”

That hope was quashed during the question-and-answer session that followed.

However, in his press conference, Powell reiterated his desire to tame inflation by saying that the Fed will do “enough” to bring inflation down to 2%, and that it will raise rates higher if it needs to.

The hawkish note drove U.S. stocks lower. The Dow Jones Industrial Average (.DJI) fell 1.63%, the S&P 500 (.SPX) dropped 1.64%, and the Nasdaq Composite Index (.IXIC) pulled back to end down 1.6%.

“Should the stresses in the financial system be reduced in short order, we cannot rule out that stronger macro data will lead the Fed to put in additional rate hikes beyond May,” said Michael Gapen, an economist at Bank of America Securities.

“But for now, we think that risks are in the direction of an earlier end to the tightening cycle.”

To be fair to Powell, U.S. Treasury Secretary Janet Yellen’s announcement that she has not considered or discussed “blanket insurance” to U.S. banking deposits probably didn’t help any.

Her comments before a Senate Appropriations subcommittee hearing dashed industry hopes for a quick government guarantee to stem the threat of further bank runs and contributed to a 15.5% fall in the shares of struggling First Republic Bank (FRC.N) on Wednesday.

Some banking groups have urged the Biden administration and the Federal Deposit Insurance Corp (FDIC) to temporarily guarantee all U.S. bank deposits, a move they say will help quell a crisis of confidence after the failure of Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O).

Reuters reported on Tuesday that government officials discussed the idea of raising the $250,000 insurance limit per depositor without congressional approval following the SVB and Signature closures.

Yellen said she believed it was “worthwhile” for Congress to look at changes to FDIC deposit insurance, but declined to say what changes she thought were warranted.

Meanwhile, inflation continues on.

The high cost of eggs has reportedly led Dollar Tree to take the food off its store shelves.

Dollar Tree has stopped selling eggs, the retail and grocery chain confirmed to USA TODAY late Sunday. The decision was due to expensive egg prices, a Dollar Tree spokesperson told multiple media outlets last week.

In recent months, the price of eggs skyrocketed to record-high levels. Costs have begun to fall for consumers, with a 6.7% drop in February, but egg prices are still up 55% over the past year. As of February, producers saw an annual 38% rise in egg costs, according to CNN.

The bouncing stock market continues, and it is clear the banking crisis and inflation have not disappeared.


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E Howard Hunt | March 23, 2023 at 9:16 am

Wow, Chairman Chair Powell? Please, are you woke, timid, PC, redundant, or just don’t know how to arrange the furniture?

    Whitewall in reply to E Howard Hunt. | March 23, 2023 at 9:51 am

    By pointing out a typo you have singlehandedly saved American banking. And the day is still young.

      healthguyfsu in reply to Whitewall. | March 23, 2023 at 5:03 pm

      Can’t believe that has 2 downvotes…that’s a great grammar policing retort!

      No dog in this fight, but I lol’d

    Don’t be ridiculous. It looks like the error was already corrected. Writers tend to copy and paste names to ensure accuracy (less chance of misspelling that way), so I suspect what happened is that the “Chair Jerome Powell” was copied and pasted from the first quote with “Chairman” having already been typed. This resulted in the error you noted and that has since been corrected.

Capitalist-Dad | March 23, 2023 at 9:59 am

I doubt the $250,000 FDIC protection wasn’t adequate for individual account holders. The lawless diktat to guarantee 100% of deposits was aimed at Democrat crony companies. As usual, the people will wind up suffering the consequences for actions outside the law, and enacted without legislative action. For all its wailing about democracy, the Democrat Reich avoids consent of the governed like the plague.

E Howard Hunt | March 23, 2023 at 10:00 am

Pointing out the absurdity of a conservative site cowering to the language police.

    That is not what happened, see my comment above.

      E Howard Hunt in reply to Fuzzy Slippers. | March 23, 2023 at 1:40 pm

      Article still uses both chair and chairman in different places. I notice a gunman is never called a gun.

        “Chair” is perfectly acceptable when discussing the chairman. It’s pretty common both in academia (Chair of a department) and in politics (chair of a committee). I’ve never even heard of anyone having a problem with that, not that you can’t, just that I’m not familiar with this angle at all. I wonder if it’s down to some kind of leftist thing, though, come to think of it. I don’t know when we started using “chair” vs. chairman, but maybe it came from whinging about “chairwoman” and the even more god awful “chairperson”? Just guessing, though. Again, for as long as I can remember, “chair” has been used quite widely.

          E Howard Hunt in reply to Fuzzy Slippers. | March 23, 2023 at 2:41 pm

          It’s a Gloria Steinem force-fed word that has been around a long time now. I objected not so much to the typo, or even the use of the execrable chair, but the alternating use of chair and chairman in the same article. The feminist objection to the use of man suffixes never extends to personages considered undesirable- gunman, conman, confidence man, tradesman, etc

          Oh, I see. The writer did not use both, though the quoted material used the less formal “chair.” The title also uses “Chair,” but we (editors) typically choose shorter words to try to keep our headlines shorter and tighter. Anyway, I get where you are coming from now and pretty much agree with the sense that this may be tied to earlier feminism. Not sure it’s super important or worth such a tirade against Leslie, who is the sweetest person you’d ever want to meet and DEFINITELY not “woke, timid, PC, redundant, or just don’t know how to arrange the furniture.” I think you can make a point without insulting our writers, editors, and site.

        healthguyfsu in reply to E Howard Hunt. | March 23, 2023 at 5:04 pm

        Not the hill to die on.

The trouble in the US economy and its banking sector should mean that additional rate hikes are unlikely or at least unnecessary. But something tells me Powell has a different idea in mind. What that is exactly is anyone’s guess, but to me, it feels like a deliberate attempt to destroy the country.

Keep an eye on the fed-funds rate, which commercial banks use to set savings and CD rates. That rate appears more likely to fall than rise further.

Declining retail consumer prices (overstock inventory and fewer sales) is one reason the Fed might stop raising and start cutting rates.

In the near term, this increase rate action means banks will cut back on lending, which would slow the economy and make further Fed hikes unnecessary. We hope.

The market rallied strong upon Powell’s announcement and follow up comments. It went into freefall moments after Yellen’s comments in her appearance before Congress when she reversed her previous promise to insure ALL depositors immediately setting off deposit transfers out of regional banks.

The banking system is very fragile right now and the crisis is far from over. The only thing that would turn things around would be for Congress to slash spending. Ironically, Yellen’s comment was that she would not raise depositor insurance without Congress first passing legislation.. Yeah. That’ll happen.

I hadn’t realized that of the 500+ executive orders by Potatus so fare, three of them committed over $1T of spending each.

We might as well just disband Congress. They delegated their oversight responsibilities to the bureaucracies years ago and now they have surrendered their control over spending to whichever crook is occupying the White House. It’s has become nothing more than than the “investigation branch” that wages pitched floor battles but does nothing in the end.

Taking a stand against redistributive change, shared responsibility through progressive prices (“inflation”). Good for them. It’s about… past time. However, a warning is insufficient to stem capital deterioration.

Re: “……U.S. Treasury Secretary Janet Yellen’s announcement that she has not considered or discussed …..”

Sadly, I have not seen any evidence that she is any more able to consider or discuss anything than Brandon.

BierceAmbrose | March 23, 2023 at 8:07 pm

They’re taking down multiple aspects of the economy at once.

You have to admire their industry.