US open: Wall Street shares down after Fed chair delivers congressional testimony
Wall Street indexes kept jumping between minor gains and small losses on Tuesday after nerves kicked in as new Federal Reserve Chair Jerome Powell delivered his first congressional testimony.
At 1500 GMT, the Dow Jones Industrial Average and S&P 500 had gained 0.16% and 0.10%, respectively, while the Nasdaq had ticked ahead just 0.01%.
However, by 1600 the Dow was down 0.30%, with the S&P 500 dropping 0.41%, and the Nasdaq losing 0.49%.
"The FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2% on a sustained basis," Powell said in remarks released by the House Financial Service committee at 1330 GMT.
On the basis of Powell's testimony, James Knightley at ING said: "At the moment the Fed are projecting three rate hikes this year while financial markets are currently pricing in around 80bp of rate hikes. Given our above consensus 3% GDP growth forecast for 2018 and the potential for inflation to rise more quickly than many in the market anticipate (wages, dollar weakness, medical care costs, cell phone data distortions, commodity prices), we are now forecasting four rate rises this year. We look for one every quarter – starting with the March 21 FOMC meeting."
For his part, before Powell began his verbal testimony, David Morrison, senior market strategist at GKFX, commented: "The expectation is that Mr Powell will indicate that the central bank is preparing to proceed with monetary tightening by raising rates by 75 basis points this year. However, if he intimates that the Fed may be prepared to make four 25 basis-point hikes rather than the predicted three, then this would result in another jump in bond yields and a corresponding sell-off in equities. But this does seem unlikely given that core PCE inflation, while picking up, still remains below the Fed’s 2% target. There seems little point in causing a market upset this early in the chairman’s tenure for no discernible gain."
Morrison also said Powell and his colleagues needed to consider fiscal stimulus in the form of Trump's tax cuts, regulatory reform and infrastructure spending.
"Not only is this stimulus inflationary, but it is also unfunded meaning it adds to the budget deficit and national debt. It also comes as the Fed is trying to turn off the monetary stimulus which has goosed markets for close to 10 years. So analysts will parse the testimony for any sign that the Fed is on guard against an inflationary spike outside their control."
On the data front, US consumer confidence jumped to 130.8 from 124.3, beating consensus forecasts of 126.5 to hit its highest reading since November 2000 as, according to the Conference Board's consumer confidence index, the drop in the stock market failed to upset consumers.
Elsewhere, new orders for American-made capital goods dropped for a second consecutive month in January, while shipments barely increased, pointing to a slowdown in spending on equipment following the robust levels of growth seen in 2017.
The Tuesday morning report from the Commerce Department came after weak January retail sales, industrial production and home sales data, all pointing to a slowdown in economic growth for the first quarter.
In another report released by the Commerce Department, data showed a widening in the goods trade deficit in January, with the shortfall on international trade widening 3% to $74.4bn in January, while exports of goods fell $3.1bn to $133.9bn and goods imports slipped $900m to $208.3bn.
The Commerce Department also reported a 0.7% increase in wholesale inventories in January, as retail inventories rose 0.8%
Lastly, the S&P CoreLogic Case-Shiller National Home Price Index rose 6.3% in December, up from the 6.1% seen in November, in line with analysts' estimates of a 6.35% year-over-year increase, as an all-time low inventory helped to push prices higher at the end of 2017.
"The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility," said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones.
In corporate news, cable TV company Comcast fell 5.58% after it made a £22.1bn bid for London-listed broadcaster Sky, outbidding 21st Century Fox.
SeaWorld shares fropped just 0.86% in early trading after the company reported a loss of £20.4bn for the fourth quarter, compared to an $11.9m in the same period a year ago.
Shares in generic pharmaceuticals group Akorn tanked as much as 31.64% after a probe into possible data breaches at the company could force it to ditch its planned $5b takeover.
Fitbit slid 12.77% after its quarterly revenue and earnings late on Monday missed analysts' expectations, while Macy's picked up 4.12% after beating earnings estimates.
Results were still to come from the likes of Square Inc, Express Scripts Holding and Priceline.