Powell Testifies on Capitol Hill
US stocks found themselves on shaky ground as Jerome Powell, Chair of the Federal Reserve, returned to Capitol Hill for the second day of his testimony. At 11:45 ET (15:45 GMT), the Dow Jones Industrial Average was more or less static, down by a mere 13 points. In contrast, the S&P 500 showed a modest rise of 0.2%, with the NASDAQ Composite pushing further upward with a 0.7% increase.
Interest Rate Hike on the Horizon
During his Wednesday testimony to the House, Powell signaled that the Federal Reserve has not finished raising interest rates as part of its strategy to combat inflation. His semi-annual testimony to Congress is part of a broader discussion on the health of the economy. Powell reiterated his stance to the Senate on Thursday, suggesting a possibility of two more rate hikes this year, conditional on the economy's performance. He highlighted that high inflation adversely impacts working families the most.
Data-Driven Decision-Making at the Fed
Assuming the economy continues on its present trajectory, Powell hinted that future rate hikes are "a pretty good guess" for the Federal Reserve's game plan. He said that futures traders currently see a 74% probability of a quarter percentage point rate hike at the Fed's July meeting. The next move from the Fed, according to Powell, will depend on key data. Current inflation data and a steady labor market suggest a cooling economy, with the latest initial jobless claims standing at 264,000, a figure mirroring the previous week's and slightly surpassing expectations.
Stock Market Repercussions
Several companies felt the impact of Powell's words on their stocks. Shares of Boeing's (NYSE: BA) parts supplier, Spirit AeroSystems Holdings (NYSE: SPR), took a nosedive by 9.7% after announcing plans to halt production at a Kansas plant due to an impending workers' strike. Boeing shares also suffered, falling by 2.4%. Furthermore, despite the parent company of Olive Garden, Darden Restaurants, Inc. (NYSE: DRI), offering yearly revenue guidance above estimates, their shares dropped by 1.6%.