S&P 500, Nasdaq Down 2% After Powell's Inflation Remarks

Barry Adams
26 Aug, 2022
New York City

Stocks on Wall Street traded lower after Fed Chairman Powell reiterated the central bank's commitment in bringing down inflation sooner than later. 

In an eight minute short speech, Chairman Powell delivered a forceful reminder of the need to fight inflation now despite the pain it is likely to inflict on the economy. 

Chairman Powell forcefully reiterated the central bank's commitment in aggressively fighting the four-decade high inflation before it entrenched and spread to a wider economy. 

Powell delivered his comments at  the Jackson Hole Economic Symposium, a gathering of central bankers, and said that reducing inflation will take time and will soften the labor market.  

The comments were widely viewed and anticipated but the forceful reiteration only highlighted the long road ahead for the policy makers and the near-term pain for households and businesses. 

"While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. 

These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain," Powell added in his prepared remarks. 

Stock markets turned sharply lower after Powell's comments and bond yields jumped above 3%. 

The S&P 500 index declined 1.5% to 4,137.15 and the Nasdaq Composite fell 1.7% to 12,414.95. 

Futures of crude oil decreased 12 cents to $92.40 a barrel but natural gas rose 12 cents to $9.46 a thermal unit. 

The yield on 10-year U.S. Treasury notes rose to 3.056% and on 2-year notes gained to 3.415%. 

Electronic Arts Inc jumped 6.1% to $135.11 after a report in Swedish media suggested that Amazon.com is likely to make an offer to acquire the game publisher as early as today. 

Farfetch Ltd soared 25.1% to $11.94 after the online luxury fashion retailer reported stronger-than-anticipated quarterly results and smaller loss. 

Ulta Beauty Salon edged up a fraction to $419.08 after the company's latest quarterly results exceeded expectations and also issued a positive outlook for the year. 

Gap Inc, after rising as much as 6%, declined 1.20% to 9.84 after the apparel retailer reported an unexpected quarterly profit on the sales strength at its Banana Republic chain. 

European markets traded sideways but accelerated the decline after the comments from Fed Chairman Powell.

Moreover, weakening in consumer confidence in the euro zone's largest economy also unnerved the market. 

 Germany's forward looking consumer confidence index declined further in September to -36.5 from -30.9 in August, according to the survey released by the market research group Gfk on Friday. 

Micro Focus International soared 93% to 519.0 pence in London trading after the Canada-based OpenText agreed to acquire the enterprise software maker for $6 billion including debt. 

OpenText declined 12.7% to $32.73.