Stocks Rebound as Markets Digest Powell Comments…..

U.S. equities rebounded from some of the losses seen yesterday that came in the wake of hawkish comments from Fed Chairman Jerome Powell. The markets continued to digest Powell’s remarks however, where he suggested the Fed is prepared to combat inflation even if it means larger rate hikes. The comments caused yields to spike yesterday, and they continued their move higher today as the yield curve has noticeably flattened. Investors also remained focused on the ongoing war in Eastern Europe and what fallout there may be of the severe economic sanctions on Russia. Dow member NIKE rose after beating earnings and revenue expectations on strong digital and direct sales. The economic calendar was light today, but the Richmond Fed Manufacturing Index showed a higher-than-expected jump in activity. Crude oil prices were lower after spiking yesterday, gold lost ground, and the U.S. dollar was little changed. Europe finished higher with Ukraine and Russia remaining in focus, while markets in Asia saw widespread gains, with Hong Kong surging.

The Dow Jones Industrial Average rose 254 points (0.7%) to 34,807, the S&P 500 Index increased 50 points (1.1%) to 4,512, and the Nasdaq Composite rallied 270 points (2.0%) to 14,109. In heavy volume, 4.7 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.70 to $109.

The equity markets made solid gains today after a sharp rally last week. Investors continue to monitor geopolitical headlines with the Russia/Ukraine conflict persisting. Optimism for a diplomatic resolution has faded somewhat as multiple rounds of talks between the two have yielded little to no progress. Moreover, the markets continue to grapple with the implications of the Fed’s commencement of its monetary policy tightening campaign, along with uncertainty regarding how aggressive the central bank may be following hawkish comments from Fed Chairman Jerome Powell yesterday that suggested rate hikes higher than 25 basis points (bps) are not off the table.

The Richmond Fed Manufacturing Activity Index remained in expansion territory (a reading above zero) and jumped to 13 from February’s 1 reading, well above forecasts of 2. New order volume, capacity utilization, shipments, and order backlogs all rose and climbed out of negative territory.

Treasuries accelerated to the downside yesterday and moved slightly lower today following comments from Federal Reserve Chairman Jerome Powell at a Fed conference yesterday morning, where he appeared to be more hawkish than what the Federal Open Market Committee (FOMC) provided in its statement last week, as well as in the presser that followed. The Chairman vowed strong action on inflation, reiterating the Committee’s post-meeting statement that rate increases will continue until the rise in prices is under control, conceding that Fed officials “widely underestimated” how long pricing pressures would last. He also added that the rate hikes could be even higher if necessary, with a move above a 25-basis point increase not off the table.

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