U.S. stocks rallied on Fed Chair Jerome Powell’s speech, despite Powell sounding hawkish tones. The game of chicken between the Fed and markets continues.
on stocks last Thursday. More action could come tomorrow after investors digest Powell's latest speech.Despite whatever hawkishness there is in Federal Reserve Chair Jerome Powell's words, it seems that markets — either in a fit of optimism or misled by confirmation bias — will always seize on the most dovish of his statements and run with them.
Analysts awaited Powell's speech with anxiety. Markets dropped the previous day on January's jobs report; they expected Powell to reassert the importance of interest rate hikes on the back of such a strong labor market. He unambiguously did so — and even suggested that rates might have to be increased beyond the currently target of 5% to 5.25%.
Yet markets reacted buoyantly. The Nasdaq Composite was the biggest winner, gaining 1.9%. The S&P 500 rose 1.29%, and the Dow Jones Industrial Average increased 0.78%. Markets, especially the tech-heavy Nasdaq, may have been cheering the launch of new AI chatbots launched by Microsoft, Google and Baidu, which could potentially usher in a tech boom. But it's just as likely that markets zoomed in on Powell's mention of disinflation.
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