Stocks slide on Powell’s comments
WASHINGTON — Federal Reserve Chair Jerome Powell suggested Thursday that inflation will pick up in the coming months but that it would likely prove temporary and not enough for the Fed to alter its record-low interest rate policies.
His message of wait-and-see patience caused bond yields to jump and stocks to fall further, signaling that investors foresee stronger growth and higher inflation on the horizon. The yield on the 10-year Treasury note had jumped from below 1% at the end of last year to roughly 1.4% Wednesday — and then surged above 1.5% during Powell’s remarks.
Stock investors, too, dumped shares in the midst of Powell’s remarks, in which he suggested that the Fed would need to see both a near-full recovery in the job market and a sustained rise in inflation above its target level before considering a rate hike.
The S&P 500 index ended Thursday with a loss of 1.3%. The Nasdaq pulled back 2.1%. Higher yields on government bonds can entice some investors to sell stocks and buy Treasurys instead.
Powell also cautioned that the economy and the job market are still far from fully recovered and that full employment would not be achieved this year.
The chairman also offered no signal that the Fed might respond soon to rising rates on Treasury securities by altering its bond-buying policies.