Market Commentary

Equities Volatile As FED’s Powell Dismisses Rate Cuts in ‘23

Raza Akram · 1 minute read

The U.S. stock market has managed to recover some losses recorded on Wednesday following the Federal Reserve’s rate decision and subsequent press conference from Chair Jerome Powell.

As expected, the FED opted for a safe route and hiked its benchmark interest rate by 25 basis points to a target range between 4.75%-5%. Stocks initially moved higher on the decision before rotating lower after Powell responded to a question about rate cuts.

“Rate cuts are not in our base case” as far as 2023 is concerned, Powell said.

On the inflation front, the FED’s rate-setting Federal Open Market Committee (FOMC) said that “some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.“

“The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” the central bank leader said in a press conference.

Moreover, shares were pushed lower in the final hours of Wednesday’s session after Treasury Secretary Janey Yellen said the government is not exploring a “blanket insurance” of all bank deposits.

Still, stocks managed to recover to a certain extent on Thursday as bond yields continued to move lower despite Powell’s remarks. The resilience of the U.S. stock market is playing into the hands of Congress members like Ro Khanna.

The Representative from California disclosed two large transactions involving buying SPDR S&P 500 ETF Trust (SPY:US). Mr. Khanna bought shares of this ETF on December 06 and October 20 with both transactions valued at $500,000 - $1 million.

On Thursday, the SPY was seen trading near $398 mark.