Wall Street reacted positively to Jerome Powell's remarks on Tuesday, as it was perceived as less aggressive and more manageable than expected. Powell expects inflation to decrease in the next year.
In the absence of pertinent economic news, yesterday's main event was an interview with Jerome Powell at the Economic Club of Washington. Following his remarks, Wall Street's major indices rose on Tuesday, with the Nasdaq and S&P500 rising more than 1%, as his remarks were perceived as less aggressive than expected.
Powell said during a question-and-answer session at the Economic Club of Washington that he expects 2023 to be a year of "significant declines in inflation," echoing the Fed's previous statement.
Indeed, the market feared that following the latest shockingly high Nonfarm Payrolls data, the Federal Reserve Chairman would change his mind and announce more restrictive monetary policy measures, or at the very least express concern about the excessively tight labor market. However, Powel made no indication that he intends to raise interest rates more than the market currently anticipates.
Furthermore, when asked if he would have made the same interest rate decision if he had known the unemployment and Nonfarm Payroll figures released last Friday in advance, he said he would not have changed his mind. As a result, the market's negative reaction to the shocking US employment figure is beginning to fade, and investors' attention will now be focused on the CPI data, which will be released next Tuesday.
Treasury yields rose slightly but not significantly, with the 10-year bond yield rising to 3.67%, and the US dollar's recent rally took a pause, with USD/JPY falling 150 pips. If the market continues in this manner, the recent movements can be described as technical corrections to the previous upward trend, which is now resuming.
With this, the Nasdaq index is approaching the year's highs, driven by large technology companies that rose sharply yesterday after passing the test of the publication of quarterly earnings, which were not entirely favorable.
During yesterday's session, Microsoft (MSFT) rose by more than 4%.
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Sources: Bloomberg, Reuters