Investors are extremely nervous: Powell's speech fuels sell-offs on US stock exchanges

Thursday, March 4th, 2021

Investors are extremely nervous
Powell's speech fuels sell-off on US stock exchanges

Investors are cashing in on the New York Stock Exchange. US Federal Reserve Chairman Powell does not want to deviate from the ultra-loose monetary policy stance. The Dow Jones slips into the red after his speech. Only the dollar is growing strongly.

Another surge in US bond yields has brought US stock markets to their knees. US Federal Reserve Chairman Jerome Powell does not see the recent rise in interest rates as a reason to deviate from his current ultra-loose monetary policy stance. Some investors had expected signals regarding the Fed's bond purchases in view of the rampant inflation worries on the stock markets.

In the bond markets, yields rose sharply in response to Powell's speech, with the dollar gaining 0.7 percent. In return, the euro fell below the $ 1.20 mark.

Meanwhile, the downturn on the stock markets intensified. The Dow Jones index lost 1.1 percent to 30,924 points after it had already been the day's low at 30,548 points. The S&P 500 was down 1.3 percent and the Nasdaq composite was down 2.1 percent.

Powell said at an online event for the "Wall Street Journal" that an upturn in the labor market could also be expected with an increase in prices. But it will very likely remain with a one-off effect in the wake of a wave of consumption after the pandemic has subsided. He does not expect that inflation will solidify. The yield on ten-year US Treasuries then screwed up another five basis points to 1.55 percent.

Technology stocks have to give up again

Speculations about rising inflation and an early exit by the central banks from their ultra-loose monetary policy triggered the recent sell-off on the bond market. The banks' short-term refinancing costs on the so-called repo market, however, atypically slipped into the red on Thursday. According to analysts, this indicated a tense situation in the money markets in view of the sell-off on the bond markets.

A jump in oil prices made the stocks of the US oil giants desirable. Chevron and Exxon stocks rose 2.7 and 4.6 percent, respectively. In the wake of this, papers from EOG Resources, Marathon Oil, APA Corp and Diamondback Energy rose by up to 7.8 percent. On the oil market, prices shot up, spurred on by an impending extension of the production restrictions by the large exporters. The price of Brent oil from the North Sea and US WTI oil rose by more than five percent to 67.47 and 64.51 dollars per barrel (159 liters), respectively.

Technology stocks had to give up again. Shares in Marvell Technology stood out with a loss of more than nine percent after the semiconductor manufacturer had forecast a tense situation in chip shipments for 2022. In the wake of a falling Bitcoin price, values ​​from the cryptocurrency sector and from companies that deal with the underlying blockchain technology flew out of the depots. The Riot, Marathon, Overstock and Silvergate papers were up to eleven percent cheaper.