The Fed Spoke, Markets Yawned: What Happened

Federal Reserve Chair spoke at the Senate Banking Committee on Tuesday and will do so again today. In his semiannual appearance, Fed Chair Jay Powell said that the central bank is waiting for more good data to affirm its decision to cut interest rates in 2024 eventually.

The Nasdaq (QQQ) and S&P 500 (IVV) gained fractionally, closing at yet another fresh high. Summertime stock markets may prove speculative. Trading volume is usually lower as bigger investors take a vacation.

Powell said that monthly inflation readings are showing modest further progress. He reaffirmed the bank’s goal to achieve a 2% inflation rate. As a result, acting too soon to reduce its policy restraint may lead to inflation again. Conversely, tight monetary conditions may stall the economy.

Powell indicated a certainty to cut rates, not raise rates, at its next meeting. Treasury yields did not move by much. The 10-year Bond yield settled at 4.30%.

Not all stock market sectors are complacent about the Fed’s monetary policy. Retail firms like Advance Auto Parts (AAP) lost 25.88% last quarter. Other big losers in the last three months include Disney (DIS), down by 17%, Dollar General (DG), down by 18%, and Dollar Tree (DLTR), down by 19%. The weakness in discount retailers suggests that the market expects consumer spending will continue to shrink.

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