Wall Street Loses Ground: Jerome Powell Cools the Heat

Wall Street Loses Ground: Jerome Powell Cools the Heat


The New York Stock Exchange lost ground on Tuesday after disappointing economic indicators were released in the United States, and Fed Chairman Jerome Powell left the markets hungry for a delay in rates. The announcement of a giant merger in the pharmacy sector with the acquisition of Allergan by Abbvie was not enough to support the market. Oil made yo-yo amid tensions with Iran, while gold and bonds continued to serve as safe havens. US 10-year yields have finished below the 2% mark.

At closing, the Dow Jones index dropped 0.67% to 26,548 points, while the broad S & P 500 index fell by 0.95% to 2,917 pts and the Nasdaq Composite dropped 1.51% to 7,884 pts. Information technology (-1.8%) and communications services (-1.6%) particularly weighed, but all 11 sector indices of the S & P 500 index fell on Tuesday.

Last week, the S & P 500 had crossed a historic high on Tuesday, and the Dow Jones had reached a high on Friday, before falling back. Markets were supported by central bank statements starting with the Fed, which paved the way for future cuts in its key rates. But the approach of the G20 summit on Friday and Saturday, and Jerome Powell’s cautious remarks on Tuesday, have made markets more suspicious.

While financial markets are now anticipating a half-point decline in the fed interest rate on July 31, the leaders of the Fed do not seem so in a hurry. Thus, the president of the St. Louis Fed, James Bullard, estimated Tuesday that a drop of half a point seemed “excessive” at this stage. James Bullard is the only member of the Fed who voted last week in favor of a quarter point decline in key rates after the meeting of 18 and 19 June.

For his part, Fed Chairman Jerome Powell firmly reaffirmed Tuesday the independence of the US central bank, systematically undermined by Donald Trump, who calls for key rate cuts and accuses the Fed of curbing the US economy.

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I am a lecturer at the University of Economics in Bratislava, department of Banking and International Finance. I have a Ph.D. academic degree, my dissertation was focused on major markets. Commodities and stock markets are also the main focus of my research and publication activities. I have approximately 10 years of investing experiences. My investments mostly focus on small- to mid-cap companies of energy sector, financial and technology.