Bond yields rise and stocks fall after Powell’s speech.

Bloomberg – Treasury yields rise and stocks fall after Federal Reserve Chairman Jerome Powell hinted that the central bank He will continue to tighten monetary policy for a longer period of time to bring inflation back to its 2% target, saying in turn that he will “tread cautiously” when deciding whether to raise interest rates again.

The S&P 500 and the Nasdaq Composite both turned red, reflecting the strong gains made immediately after the comments. The price of the dollar rose.

The Fed chief welcomed the slow rise in prices achieved by the US economy thanks to tighter monetary policy and continued easing of supply constraints post-pandemic. However, he warned that the process “still has a long way to go, even with the more positive recent readings”. Meanwhile, Powell indicated that the Fed may keep interest rates steady at its next meeting in September, as investors expect.

According to Ed Clissold of Ned Davis Research, the rally in 10-year Treasury yields, which has attracted a great deal of attention lately, has not been violent enough to derail stocks, nor has 2-year yields been. Historical terms.

However, the long-term picture looks bleaker.Equities are now more expensive than cash for the first time since 2001 when Treasury yields are compared to the earnings performance of the S&P 500, Ned Davis’ analysis shows. “As long as the stock market is making double-digit gains, investors may not pay attention to relative valuations, but if cash continues to offer good returns, it could exacerbate the next stock market bear,” Clissold says.

According to Michael Wilson of Morgan Stanley, US stocks fell on Thursday, despite an excellent report from Nvidia Corp. (NVDA) shows that this year’s rally is “over” and warns of further declines.

“Markets are above the good news and below the bad,” Wilson said in an interview with Bloomberg Radio. “I can think of no better news than we got from that company,” he said, referring to Nvidia. The failed push is “another negative technical sign that the rally has lost steam. Now we’re going to need a new story to get people excited, and I don’t know what that story is.”

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