The S&P 500 and Nasdaq Composite indexes rallied on Thursday, breaking a three-day streak of declines.
Both indexes are still down for the week, however. The Dow Jones Industrial Average declined for a fourth trading session.
Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on Thursday that the central bank is committed to bringing inflation down but noted that it won’t have to move at the aggressive pace it took last year.
Still, a larger-than-expected rate increase from the Bank of England helped add to investors’ fears about the global economy.
Oil prices fell on those concerns. West Texas Intermediate crude, the US benchmark, fell 4.3% to about $69 a barrel. Brent futures, the international benchmark, declined to about $74 a barrel.
Tech stocks rallied, helping lift the broader S&P 500 and tech-heavy Nasdaq Composite. Tesla shares gained about 2%, Microsoft added 1.8% and Apple increased 1.7%.
Shares of Spirit AeroSystems, a Boeing supplier, slid 9.4% after it halted production at a Kansas facility. Workers had moved to strike starting June 24.
Overstock.com shares surged 17.3% after the company won an auction for Bed Bath and Beyond’s intellectual property and digital assets.
The Dow fell about 5 points, or 0.01%.
The S&P 500 gained 0.4%.
The Nasdaq Composite added about 1%.
As stocks settle after the closing day, levels might change slightly.
Sen. Elizabeth Warren grilled Federal Reserve Chair Jerome Powell on Thursday over the failures of regional banks in recent months.
The Massachusetts Democrat pointed to comments Powell made in the past on relaxing banking regulations and said the Fed chair played a role in recent bank collapses.
“Yesterday, Chair Powell, this committee voted on a bill to help hold CEOs accountable when their actions blow up banks. At the Fed, you are the one who lobbied, who drafted and who voted for weaker rules and you were ultimately responsible for the team of Fed supervisors who fell down on the job,” Warren said.
She asked Powell if he “took responsibility” for his role in recent bank failures. Powell said that “under the law, the vice chair for supervision” has full responsibility and that his own focus is “moving forward.”
“Yeah, well, that kind of sounds like not taking responsibility for what you’ve done in the past,” Warren said.
Mortgage rates ticked lower for the third week in a row as investors absorbed strong signals from the housing industry and last week’s pause on rate hikes by the Federal Reserve after 10 consecutive hikes.
The 30-year fixed-rate mortgage averaged 6.67% in the week ending June 22, down from 6.69% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.81%.
Mortgage rates have remained over 5% for all but one week during the past year and even went as high as 7.08%, last reached in November, but have been coming down since the end of May.
“Mortgage rates slid down again this week but remain elevated compared to this time last year,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Potential home buyers have been watching rates closely and are waiting to come off the sidelines. However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.”
Oil fell Thursday as investors grew increasingly concerned about how higher interest rates could hurt the global economy.
West Texas Intermediate crude futures, the US benchmark, fell about 4.3% to about $69.40 a barrel.
Brent crude futures, the international benchmark, slipped 3.6% to $74.32 a barrel.
The Bank of England on Thursday raised interest rate by a half point, surprising investors who largely expected a quarter-point hike. That brings the main borrowing cost for commercial banks in the United Kingdom to its highest level since 2008.
Meanwhile, Federal Reserve Chair Jerome Powell said Thursday before the Senate Banking Committee that the central bank will do what it takes to bring US inflation down to 2%.
The Fed remains far from that target: The Consumer Price Index, which measures price changes for a basket of goods and services, showed an increase of 4% for the year ending in May.
Investors had expected oil prices to surge this year, banking on the reopening of China’s economy after Covid shutdowns to drive demand up. But China’s economy has struggled to reignite, leading its banks to cut benchmark rates on loans this week and deepening concerns about the economy’s recovery.
As Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on Thursday, many Senate Republicans raised questions about new banking regulations, specifically whether or not small banks will be subject to higher capital requirements.
Powell made it clear a proposal is in the works and has already been circulated within the Fed, but that he isn’t yet able to comment on it.
He reassured that the focus of new banking regulation will be “skewed” toward the largest banks and large regional ones similar to failed Silicon Valley Bank.
“I would say we are committed — and I am personally committed — to learning the right lessons from what happened to Silicon Valley Bank,” Powell said. “I think there is a clear need to strengthen both supervision and regulation of banks of that size.”
Sen. Bob Menendez, a New Jersey Democrat, asked Powell about the potential failures of banks that hold a high amount of commercial mortgages that will come due within the next two years amid declining property values and higher interest rates. Powell said the Fed has “identified those banks” and that issue is not something larger banks are dealing with.
“It’s seen in some of the smaller banks,” he said. “And there’s a supervisory toolkit where we work with banks to try to help them resolve those issues by raising capital or dealing with what’s happening in the office space nationally.”
The tech-heavy Nasdaq rallied 0.5% mid-Thursday morning as Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee that more rate hikes are coming.
Mega-cap tech stocks such as Apple and Amazon have been defensive plays for investors worried about an economic downturn this year, favored for their massive balance sheets and the hype surrounding artificial intelligence.
Their gains have puttered out recently, however. The Nasdaq fell for the past three trading days, coming off a strong rally that saw behemoths including Apple and Microsoft notch all-time highs last week.
Apple shares rose 1.3%, Microsoft gained 1.2% and Nvidia added 0.3%.
The S&P 500 briefly edged into positive territory before falling again.
A closely watched economic barometer is continuing to sound the alarm about an impending recession.
The Conference Board’s Leading Economic Index for May fell for the 14th consecutive month, dropping 0.7% from the month before, according to a report released Thursday by the business membership and research organization.
Worsening credit conditions, lower consumer expectations for business activity, and declines in new manufacturing orders are among the drivers for the latest monthly drop, the Conference Board said.
“The US Leading Index has declined in each of the last fourteen months and continues to point to weaker economic activity ahead,” Justyna Zabinska-La Monica, the Conference Board’s senior manager of business cycle indicators, said in a statement. “Rising interest rates paired with persistent inflation will continue to further dampen economic activity.”
Tight monetary policy coupled with low government spending will lead to a recession, likely starting between the third quarter of this year and the first quarter of 2024, according to the report.
US home prices fell in May at the largest annual rate in more than a decade, according to a National Association of Realtors report released Thursday.
The median existing home price was $396,100 last month, down from 3.1% from a year ago, marking the largest year-over-year price reduction since December 2011.
Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — rose 0.2% from April to May. Annually, sales were down 20.4% from a year ago, and the seasonally adjusted annualized sales pace dropped from 5.4 million units a year ago to 4.3 million in May.
Mortgage rates remain volatile — so far this year, average rates have ranged from 6.09% to 6.79%, but were fairly steady in April when some of the homes closed in May would have gone under contract.
“Mortgage rates heavily influence the direction of home sales,” said Lawrence Yun, NAR chief economist. “Relatively steady rates have led to several consecutive months of consistent home sales.”
Stocks fell Thursday, on pace for a fourth day of losses ahead of Federal Reserve Chair Jerome Powell’s second day of testimony before congressional lawmakers.
Shares of Spirit AeroSystems, a Boeing supplier, fell 9.7% after it halted production at a Kansas facility. That comes after workers moved to strike starting June 24. Boeing shares fell 2.9%.
Overstock.com shares rose 6.8% after the company won an auction for Bed Bath and Beyond’s intellectual property and digital assets.
The Dow fell 54 points, or 0.2%.
The S&P 500 slipped 0.3%.
The Nasdaq Composite declined 0.4%.
There were 264,000 first-time claims for unemployment insurance during the week ending June 17, unchanged from the previous week’s upwardly revised total, according to Department of Labor data released Thursday.
Economists were expecting 260,000 initial claims to be filed, according to Refinitiv.
Continuing claims, which are filed by people who have received unemployment benefits for more than one week, were 1.759 million for the week ended June 10, unchanged from the prior week’s unrevised total. Economists were expecting 1.782 million continuing claims, according to Refinitiv.
Weekly jobless claims, which are highly volatile and frequently revised, remain below historical averages: In the decade before the pandemic, weekly claims for unemployment benefits averaged 311,000, Labor Department data shows.
The four-week moving average for initial claims has trended up in recent weeks, landing at 255,750 claims. That’s the highest level since November 2021, according to the Labor Department.
Markets continue to sink Thursday morning, ahead of another round of testimony from Federal Reserve Chair Jerome Powell and a slew of economic data.
Dow futures were down 60 points or 0.2%.
S&P 500 futures fell 0.2% and Nasdaq Composite futures were 0.2% lower.
Traders will be looking to Powell for more details about the timing and scale of the rate hikes he has signaled the Fed will implement later this year.
The Bank of England raised interest rates by half a percentage point Thursday, after data this week revealed surprisingly stubborn inflation.
The decision in favor of a 13th consecutive hike takes the main borrowing cost for commercial banks in the United Kingdom to 5%, the highest since April 2008.
Financial markets now expect the Bank of England’s benchmark interest rate to reach 6% around the turn of the year — a level not seen in two decades — in the ever more desperate battle to control rising prices.
That’s bad news for more than 2 million UK mortgage holders, who are bracing for a sharp increase in their monthly mortgage bills when they are forced to refinance this year and next.
Higher mortgage rates are likely to dampen consumer spending and raise the chances of a deeper economic slowdown in the United Kingdom, which has so far managed to escape a recession.
The Bank of England had little choice but to hike rates after official data Wednesday showed that UK inflation stayed stuck at 8.7% in May, defying forecasts for a tick-down.
And bucking the trend seen in the United States and Europe, core inflation — which strips out volatile food and energy costs and is a better gauge of the underlying trend in prices — rose last month, hitting a 31-year high of 7.1%. The Bank of England’s target for headline inflation is 2%.
Chicago Federal Reserve President Austan Goolsbee said Wednesday the decision to pause interest rate hikes earlier this month after 10 consecutive rate hikes “was a close call.”
“We’re in this weird, foggy environment where it’s hard to figure out where the road is,” he said in an interview with The Wall Street Journal. That’s why he said the pause was “perfectly appropriate.”
Goolsbee said the six-week pause won’t be enough time for Fed officials to establish “a permanent framework” for getting inflation under control. But data from upcoming economic indicators, like the jobs report and Personal Consumption Expenditures price index, will give Fed officials a better sense of what to do when they meet from July 25 to 26.
For the time being, he said he hasn’t decided how he’ll vote at next month’s meeting.
A few things became clear from Fed Chair Jerome Powell’s testimony to the House Financial Services Committee on Wednesday: The Fed isn’t done fighting inflation, the focus of new banking regulation will likely be on the biggest banks and the central bank remains attuned to its employment mandate.
Democrats repeatedly emphasized to Powell the Fed’s mandate to achieve full employment, underscoring their fears of job losses if the central bank overdoes it.
Meanwhile, questions from Republicans illustrated their concerns over forthcoming banking regulation. Powell doubled down on the hawkish view that the Fed isn’t done battling inflation.
Here are the key takeaways from Powell’s testimony to House lawmakers.
If inflation falls to 2% by the end of this year, that means the cost of everything will no longer be going up, right? Wrong. But that’s what the majority of UK residents think, according to a new survey from polling group Survation.
What’s more, almost a third of those surveyed said they think they’ll pay less than they do now.
It’s a common misconception that falling inflation equates to falling prices. But the two don’t always go hand in hand.
The central bank is in a pivotal moment in its fight against inflation, which remains well above the Fed’s 2% target, and Wall Street is watching to see how the influential Fed chair interprets economic data as hints for future policy moves.
Financial markets see a roughly 79% chance the Fed will hike rates by another quarter point in July, according to the CME FedWatch Tool.
Retail spending rose last month, mostly driven by higher-income consumers, and employers added a robust 339,000 jobs in May. The economy still has momentum and minutes from the Fed’s meeting earlier this month will show if economists at the central bank still think there will be a recession later this year. Those minutes will be released in early July.
What Fed officials decide during their July 25-26 meeting depends on what economic indicators show in the coming weeks, but it’s unlikely they’ll learn anything new. Still, Powell said holding rates steady was a “prudent” move, given that research shows that it takes at least a year for rising interest rates to trickle through to the broader economy. The Fed began lifting rates in March 2022.
Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee on Wednesday, just one week after the central bank paused its most aggressive rate-hiking campaign in decades.
Powell doubled down on the hawkish view that the Fed isn’t done battling inflation in his remarks to lawmakers.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go,” he said.
But Powell reassured lawmakers Wednesday that the Fed’s policy moves will evolve as inflation slows.
“Now we’re moderating that pace, much as you might do if you were to be driving 75 miles an hour on a highway, then 50 miles an hour on a local highway, then as you get closer to your destination you try to find that destination you slow down even further,” he said.
