U.S. markets show mixed response as Fed Chair signals steady interest rates

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17th April 2024 – (New York) U.S. stock markets displayed a mixed finish on Tuesday, reflecting investor reactions to Federal Reserve Chair Jerome Powell’s latest remarks. Powell’s indication that interest rate cuts remain unlikely in the near future led to varied performances across major indices.

The Dow Jones Industrial Average saw modest gains, closing up by 63.86 points, or 0.17 per cent, at 37,798.97. Conversely, the S&P 500 experienced a slight decline, falling by 10.41 points, or 0.21 per cent, to end at 5,051.41. The Nasdaq Composite also slipped, dropping 19.77 points, or 0.12 per cent, to close at 15,865.25.

Sector performances within the S&P 500 were predominantly negative, with real estate and utilities sectors witnessing the most significant losses, declining by 1.53 per cent and 1.36 per cent, respectively. Meanwhile, technology and consumer staples sectors provided some resistance, edging up by 0.23 per cent and 0.07 per cent, respectively.

During his speech, Powell highlighted the persistent nature of inflation, noting that although it has started to decline, the reduction is not rapid enough to alter the current monetary policy stance. “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell stated. He emphasised that the policy would remain restrictive as long as necessary to combat inflation.

The Treasury market reacted to Powell’s comments, with yields on the 2-year note briefly topping 5 per cent. The 10-year yield also climbed, reaching its highest closing level since early November at 4.657 per cent.

In the housing sector, new data revealed a significant downturn, with housing starts for March showing a 14.7 per cent decline to 1.3 million units, marking the largest drop in four years.

Amidst these economic indicators, Morgan Stanley’s shares rose following a stronger-than-expected first-quarter profit, largely attributed to a boost in investment banking income. In contrast, Bank of America’s shares dipped after the bank reported a decrease in quarterly profits due to higher provisions for loan losses.

Healthcare giant Johnson & Johnson also faced a downturn in stock value as it missed revenue forecasts, particularly impacted by lower sales from its psoriasis medication, Stelara.