US stocks ended a choppy session lower after two Federal Reserve officials highlighted the central bank’s resolve to be persistent until it brings inflation down meaningfully.
The S&P 500 was down 0.9%, snapping a two-day rally.
The tech-heavy Nasdaq 100 also fell. Treasury yields climbed, with the 10-year rate around 3.87%.
Fed Vice Chair Lael Brainard briefly buoyed sentiment after she said, during a Bloomberg event in Washington, that it would be appropriate “soon” for the central bank to slow its pace of interest-rate hikes.
However, she also emphasized that the Fed had “additional work to do” to bring inflation down, which kept some investors on the edge. Brainard did not explicitly commit to a step-down to a half-point hike in December, nor did she elaborate what she meant by “soon.”
“I think Brainard’s comments underscore the uncertainty of the path forward and the data dependence of the Committee,” said Jake Schurmeier, portfolio manager at Harbor Capital Advisors. “They don’t want a slower pace of rate hikes to be confused for less restrictive policy.”
Last week’s CPI-fueled rally, which propelled the S&P 500 to its best week since June, may be unsustainable.
The pace of decline will be uneven.
Moreover, there’s still a long way to go to get to the Fed’s target of 2% average inflation. That’s why Fed governors have been lining up to talk down any market euphoria that a real pivot is in sight.
It is hard to imagine the spring time of rocket high price increase in short term.
Fed will continue its effort not to give euphoria to markets that easily may have expectation of low interest rates.
But at some unexpected moment, you will see the change of stance of Fed.
Source: Bloomberg