Stocks Erase Losses as Powell Restates Promise: Markets Wrap

A chart displayed on an electronic stock board outside a securities firm in Tokyo, Japan, on Thursday, Oct. 29, 2020. Japanese stocks pared losses after the Bank of Japan’s policy decision and as US futures bounced back following a global equity route. Photographer: Kiyoshi Ota / Bloomberg “/>

US stocks erased earlier losses and Treasuries advanced after Federal Reserve Chair Jerome Powell reiterated his commitment to curb inflation during his congressional testimony, reigniting fears that the central bank’s aggressive path of interest rate hikes could tip the economy into a recession.

The S&P 500 and the tech-heavy Nasdaq 100 rose. Treasury yields declined with the 10-year yield hovering around 3.15%. The dollar fell after earlier gains while other safe haven assets like gold climbed.

The S&P 500 is poised for its worst first half since Richard Nixon’s presidency as optimism evaporates that policy makers can achieve a soft landing as they navigate a course of aggressive monetary tightening to tame inflation. Powell, on Wednesday, said the central bank will keep raising interest rates to tamp down on inflation, mostly restating his comments from a last week. He made no reference to the size of future hikes during his testimony.

“Such aggressive tightening will make a soft landing very difficult to engineer and those fears of recession or at least significantly slower growth are hitting demand for equities,” Fiona Cincotta, senior financial markets analyst at City Index, said in a note.

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