Investors digested Fed Chairman Powell’s latest speech on inflation, and U.S. stocks closed higher across the board without fear of a number of Fed officials. As of the close, the Dow rose 377.2 points, or 1.2%, to 32,151.7 points; the S&P 500 rose 61.2 points, or 1.5%, to 4,067.4 points; the Nasdaq closed at 12,112.3 points, up 250.2 points, or 2.1%.
To sum up the week, the three major stock indexes all recorded gains, ending the weekly three-day streak. The Dow rose 2.7% for the week, the S&P 500 rose 3.7% and the Nasdaq rose 4.1%.
Former Fed Vice Chairman Richard Clarida said in an interview on Friday that Fed officials are not just shouting slogans and will do more to fight inflation. He expects the federal funds rate to climb well above its current level of 2.25% to 2.5%.
On the same day, a number of current Fed officials expressed their opinions intensively. Fed Governor Christopher Waller backed another sharp hike this month, by 75 basis points. “Looking ahead, I can’t tell you what is the appropriate policy path, and the end point of interest rates and when they get there will depend on economic data.” He said the Fed may have to raise interest rates as far as the rest of the year if inflation doesn’t cool down. above the 4% level. However, he said inflation was falling from more than 40-year highs and welcomed the phenomenon.
Kansas City Fed President Esther George also expressed concerns about high inflation. She advocated a more prudent tightening approach, supported steady interest rate hikes, and made predictable policy adjustments based on data. To deal with inflation, a sustained policy response was required. “Given that there may be a lag in the transmission of monetary policy tightening to the real economy, the soundness and purpose of the policy are better than the speed.” She also said that the view of “peaking interest rates” at this stage may only be a kind of guess.
On Thursday, Powell reiterated his “firm commitment” to lowering inflation, stressing the importance of fighting it, in case the public gets accustomed to high prices and sees it as the norm. “History teaches us not to ease policy prematurely. My colleagues and I will stick to containing inflation until our goal is reached,” Powell said.
After Friday, the Fed will officially enter a period of silence before the meeting on interest rates. The Fed will hold an interest rate meeting on the 20th and 21st. The market generally expects that the central bank will raise interest rates by 75 basis points for the third time in a row. This interest rate hike cycle will be the beginning of the 1990s. The fastest pace of tightening ever.
Richard Bernstein, CEO of investment firm Richard Bernstein Advisors, said people are grossly underestimating what the Fed must do to fight inflation. “The irony is that when real interest rates are at record lows, investors are still expecting a policy shift from the Fed. In fact, the Fed hasn’t even really started fighting inflation, real rates haven’t turned positive. Under the circumstances, it is difficult for us to be bullish on the market in the short term.”
Among individual stocks, Tesla closed up 3.6% as the company evaluates the feasibility of building a lithium refinery in the Texas Gulf Coast region. According to Tesla’s application documents to the Texas Comptroller’s Office, the above-mentioned factories will focus on the development of battery-grade lithium hydroxide. If the project is approved, construction will begin as early as the fourth quarter of this year, with commercialization in the fourth quarter of 2024. operation. In April, Tesla CEO Elon Musk said that lithium prices have reached crazy levels, and unless it chooses to increase procurement costs, Tesla may have to go directly into mining and refining on a large scale. Lithium prices have surged 120% year-to-date, market data shows.