Stocks Lacked Direction as Powell Testifies to Congress

Barry Adams
22 Jun, 2022
New York City

Stocks in volatile trading struggled to advance after the Fed Chairman reiterated the central bank's commitment to fight inflation. 

Fears of an economic recession weighed on investor sentiment after the Fed Chairman Jerome Powell reaffirmed central banks commitment in fighting inflation. 

"We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so. 

We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses," Powell told Congress on Wednesday. 

Though the Fed expressed its strong commitment to fight inflation, prices have been rising at a faster pace for more than a year. 

The consumer price index has been rising at more than the Fed's target rate of 2% for the last seventeen months in a row. 

The S&P 500 fell 0.1% to 3,759.89 and the Nasdaq Composite declined 0.1% to 11053.08. 

The popular market indexes opened lower and managed to climb above the flatline after one hour of trading. 

For the next two hours, the indexes registered gains in the session but began to waver around mid-day and dipped briefly in the negative territory but quickly rebounded. 

For the next three hours indexes advanced in choppy trading and near the close began to lose momentum. In the final five minutes of the session, the indexes sank and closed down for the day. 

The yield on 10-year Treasury notes declined 14 basis points to close at 3.164%. 

Futures of crude oil fell 3.8% to $105.34 a barrel and natural gas rose a fraction to $6.81 a unit. 

On Wednesday, President Joe Biden is expected to ask Congress to drop federal gasoline and diesel taxes for three months. 

Weaker oil prices dragged down stocks in the energy complex. 

Chevron and Marathon Oil dropped more than 4%, Exxon Mobil declined 4%. Schlumberger NV fell 6% after president Biden's administration urged Congress to drop federal tax on gasoline and diesel sales for the next three months.

Federal tax on regular gasoline is 18 cents and diesel 24 cents a gallon. 

Lower tax at the pump could provide relief to consumers but it can also lift the fuel demand worsening tight supply.   

After the market closed today, KB Home reported sales in the second quarter ending in May increased 19% to $1.72 billion and net income soared 47% to $210 million. 

The home builder delivered 3,469 homes, matching the deliveries in the quarter a year ago and average selling price increased 21% to $494,300. 

The home builder guided sales in the fiscal year between $7.3 billion and $7.5 billion and average home selling price of $500,000. 

 

European Markets Accelerate Declines 

 

European markets accelerated declines after the U.K. inflation surged more than expected. 

Consumer price index rose 9.1% in May from 9.0% in April, according to the latest data from the Office for National Statistics.

Month to month price increase slowed to 0.7% from 2.5% in April, the report stated. 

The DAX index fell 1.1% to 13,144.28, the CAC-40 index declined 0.8% to 5,916.68, and the FTSE 100 index dropped 0.9% to 7,089.22.

Oil companies traded lower after crude oil prices declined 6% in the region. 

BP Plc fell 3.1%, Shell Plc decreased 3.6%, and Repsol S.A. declined 4.3%. 

BASF SE declined 5.8% to 43.56 euros after the chemical company said business in the second-half is likely to face considerable downturn. 

 

Asian Markets Turn Lower 

 

Markets in Asia closed lower following weak commodities prices and European markets. 

Crude oil prices in Asia declined 4% and natural gas prices dropped between 2% and 3% on the global recession worries. 

The Nikkei index in Tokyo declined 0.4% to 26,149.55 and indexes in Hong Kong dropped 2.6% to 21,008.34 and in Shanghai fell 1.2% to 3,267.20. 

The Sensex index lost 709.54 or 1.4% to 51,822.53 and the Nifty 50 index dropped 225.50 or 1.44% to 15,413.30.