Stocks closed higher after new comments from the Fed

U.S. stocks surged on Thursday with investors turning off comments from Federal Reserve Chairman Jerome Powell, while the European Central Bank took decisive steps to curb inflation.

Addressing the online conference sponsored by the Cato Institute on Thursday, Mr. Powell confirmed the central bank would act resolutely to battle price pressures and prevent the society from having a false belief that high inflation is a standard practice. In recent speeches, the Fed chairman declared again that fighting inflation remains the central bank's key objective, even if a possible economic slowdown may happen.

Investors are waiting for the third consecutive 0.75-point rate rise, considering public statements and interviews ahead of the future Fed meeting.

"Enterprises' balance sheets are relatively strong, while consumer ones are also great," assuming any recession to be relatively shallow, said Aoifinn Devitt, chief investment officer at Moneta Group. “But these can be bad news as the Fed may continue rates hiking."

From an economic perspective, initial jobless claims, being a measure of layoffs, declined to a seasonally adjusted 222,000 last week from the previous week's revised 228,000, the Labor Department noted Thursday. The latest claims data reveal that the U.S. labor market is holding strong despite the chills earlier this year.

According to Carl Ludwigson, managing director of Bel Air Investment Advisors, as long as the labor market remains tight, the Fed is likely to have a hawkish position and risk triggering a possible economic recession.

"I expect the Fed to manage the labor market cooling," Mr. Ludwigson said. "The key issue is that monetary policy is implemented with particular lags, so it's hard for the Fed to determine the stop point."

In fact, the yield on the benchmark 10-year Treasury bond increased to 3.291% from 3.264%, the seventh-highest level this year, as Dow Jones Market Data revealed.

Bond yields and prices are moving in opposite directions.

Source:

https://www.wsj.com/articles/global-stocks-markets-dow-update-09-08-2022-11662636970