Economy

Stock Market Searches For Direction As Traders Decipher Powell Testimony

Stock Market Searches For Direction As Traders Decipher Powell Testimony

Asian equities were depressed during early trading on Wednesday following Wall Street's steep decline overnight.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, building on its bounce from a two-month low touched on February 9.

The S&P 500 was up almost 3 points, or 0.1 percent, at 2,748, as of 11:20 a.m.

The euro edged up 0.1 percent to $1.2332, with investors seen unlikely to take on big positions this week ahead of key political events in Europe.

At 12:30 p.m. ET, the Dow Jones Industrial Average was down 0.42 per cent at 25,601.84. The Fed's preferred price gauge - tied to consumption - rose 0.4 percent in January from the previous month and was up 1.7 percent from a year earlier, according to the Commerce Department.

After his comments highlighting the strengthening economy roiled financial markets on February 27 amid concerns the Federal Reserve would raise interest rates at a faster pace, Powell made it clear that gradual rate hikes would allow the economy to continue to expand.

Indications by the new chairman of the US Federal Reserve, Jerome Powell, that the Fed could lift interest rates as many as four times this year in response to concerns over a possible wages push by US workers led to sharp sell-off in financial markets on Tuesday and Wednesday.

Higher borrowing costs and interest rates create a headwind for stocks, as they tend to slow economic growth and make bonds a more attractive investment alternative to stocks.

Inflation has mostly missed the central bank's 2 percent target since 2012, though policymakers expect it to rise toward their goal. The SPX dropped during Powell's testimony, while the VIX and the 10-year Treasury yield spiked.

More news: The price of oil rose above $ 67

Dental supplies maker Patterson Companies plunged 22 percent after reporting weak earnings for the latest quarter. December's 2.5 percent rate was the lowest since 2007.

A PAINFUL MONTH: The S&P 500 is on track to close out February with a 2.8 percent loss, a sharp turnaround from its blistering start to the year. It was a continuation of the remarkably smooth rise that investors enjoyed in 2016.

The job market is tight, but Powell isn't anxious that wages are rising too quickly, which can lead to inflation. S&P 500 futures were up 0.2 percent at 2,719.

MARKETS OVERSEAS: Global markets were subdued.

Gold prices fell 1.3% or $17 now trading at $1,315 an ounce.

Bilal Hafeez, a macro strategist at Nomura in London, said the extent of the dollar reaction to the tariffs will likely depend on the reaction of other countries to the move.The euro, meanwhile, was up 0.5 percent versus the dollar, with the focus on Sunday's Italian parliamentary election and the level of support for populist agendas that could have a wider impact on the European Union.

The dollar slumped to its lowest levels since late 2014 against a basket of major currencies earlier in February, but it has since recovered nearly 2 percent. Hong Kong and Chinese shares outperformed after the Caixin manufacturing gauge came in above expectations.

Trump announced on Thursday he would impose tariffs of 25 percent on imported steel and 10 percent on aluminum, in a move the administration said would protect USA industry.

Gold prices fell 0.07 per cent to Dollars 1,316.80 an ounce and silver by 0.37 per cent to USD 16.32 an ounce in Singapore.