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Wall Street’s main indexes closed in the green on Tuesday after staging a comeback from earlier losses as investors weighed testimony from Federal Reserve Chair Jerome Powell.
The Nasdaq rallied for the second consecutive session to close 1.4% higher at 15,153.45, while the Dow jumped 180 points. The S&P 500 also clawed back from a morning drop to close in positive territory.
Federal Reserve Chairman Jerome Powell told Congress in his confirmation testimony on Tuesday that if the pace of price increases fails to slow, the central bank will get more aggressive with raising short-term borrowing costs.
“If we see inflation persisting at high levels, longer than expected, if we have to raise interest rates more over time, then we will,” Powell said at a hearing before the Senate Banking Committee.
“Investors in the equity markets are assuming that inflation comes down to at least a low enough level to not bother stocks that much,” ProShares global investment strategist Simeon Hyman told Yahoo Finance Live. “But the Fed’s activity you need to split into two pieces.”
“Before you get to rate hikes, you have to talk about tapering and the new news of the last 10 days — an accelerated unwind of the balance sheet,” he added, indicating this could determine longer-term rates to rise regardless of whether inflation comes down and independent of the Fed’s speed on raising rates.
“Ultimately, those actions might mean there don’t have to be too many rate hikes,”Hyman said.
The central bank’s monetary policy will remain in focus this week, with the Bureau of Labor Statistics’ (BLS) latest Consumer Price Index (CPI) in the spotlight as investors continue to gauge inflationary pressures and the Fed’s potential response.
Another red-hot read on the latest number is expected, with economists forecasting a print of 7.1% in December based on Bloomberg consensus data, up even more from November’s 6.8% year-over-year clip.
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