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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