Friends
Market participants threw a little tantrum today when Fed Chair Powell indicated that, though the Fed was indeed concerned about the back up in longer term interest rates, they weren’t ready to do anything about it. In other words they are not ready to step in a buy everything in sight. How dare they? The Fed knows by now that investors don’t react kindly to that type of treatment. Spoiled might be a good term to use.
Anyway, the paradigm of higher interest rates equals lower stock prices held true again today. After the Fed Chair’s comments, bond yields rose and stocks prices fell. By the close the Dow Jones Industrial Average was down 345 points to finish the day at 30,924. The S&P 500 was down 51 points to close at 3,768. The Nasdaq Composite Index was down 274 points to close at 12,723. Gold was down $21 to trade at $1,694 per ounce, while oil was up $2.84 to trade at $64.12 per barrel WTI.
What is interesting is that rates appear to be rising for the right reasons. Expectations of a booming second half of the year for the economy and rising inflation (remember that the Fed has been trying to stoke inflation for about a decade now) should cause rates to rise- at least back to where they were pre-pandemic. But, markets are used to unending and limitless accommodation from the Federal Reserve. A hint of anything less causes these types of reactions. We are, indeed, living in interesting times. Let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
