Market Hears Powell’s Comments, Rally Extends

Market Hears Powell’s Comments, Rally Extends

$DIA, $SPY. $QQQ, $RUTX, $VXX

  • No recession in sight, No rate hikes ahead.

Thursday, Federal Chairman Jerome Powell said the US central bank has the ability to be patient on policy given inflation is stable, allowing it to assesses whether the US economy will slow this year as some in financial markets worry.initial comments boosted stocks, they later slipped when Mr. Powell said the Fed would shed significantly more assets than it already has.

Those initial comments boosted stocks, then later Mr. Powell said the Fed would shed more assets than it already has.

Stocks then sold off on the prospect of more liquidity being drained from the system. The S&P 500 index was down about 0.4 percent and 10-year US Treasury yields hit a session high Thursday afternoon, reflecting investors’ sensitivity to any hint about how much longer the Fed will continue to pare its roughly $4-T portfolio of bonds.

The reaction by investors underscores the delicate balance Mr. Powell must maintain as he continues to see strong economic momentum at home even as investors cope with the slowdown overseas.

“Especially with inflation low and under control we have the ability to be patient and watch patiently and carefully as we … figure out which of these 2 narratives is going to be the story of 2019,” Mr. Powell said when asked at the Economic Club of Washington about December forecasts from Fed policymakers showing they expect a median of 2 more rate hikes in Y 2019, after 4 last year.

He downplayed December predictions from Fed policymakers showing that, at the median, interest rates would be raised 2X this year. “There is no such plan,” Mr. Powell said. “That was conditional on a very strong outlook for 2019, an outlook that may still happen.”

The Fed raised rates 4X last year in the face of robust economic growth and unemployment that touched its lowest level in 50 years.

Mr. Powell said, for now, there is no evidence suggesting an elevated possibility of a recession.

“There is no pre-set path for rates…particularly now,” he said. If global growth slows more, “I can assure you…we can flexibly and quickly move policy, and we can do so significantly if that’s appropriate,” he added.

The market then digested Mr. Powell’s comments, turned and finished on the highs.

DJIA+122.80 at 24001.92, NAS Comp +28.99 at 6986.08, S&P 500 +11.68 at 2596.60

Volume: Trade on the NYSE came in at 896-M/shares exchanged

  • Russell 2000 +7.2% YTD
  • NAS Comp +5.3% YTD
  • S&P 500 +3.6% YTD
  • DJIA +2.9% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Neutral to Bullish.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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