Stocks Close Lower After Yellen and Powell Testimonies

2 min read
24 Mar, 21
Written by Clover4X



Article Highlights:
  • Fed Chair Jerome Powell eases inflation fears as markets slide
  • Janet Yellen says tax raises needed for Biden’s $3tn economic plan

Stocks Close Lower After Yellen and Powell Testimonies

US equity markets ended the session on Tuesday in negative territory. This comes following the testimonies of Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell. Major US indexes, Dow Jones, S&P500, and Nasdaq Composite slipped. While bond yields eased for a third straight day as investors digested the commentaries of the speakers.

Dow Jones Industrial Average ticked down 0.94%, or 308.05 points, to end at 32,423.15. The S&P500 closed lower by 0.76%, or 30.07 points, and finished at 3,910.52. Whereas, the tech-focused Nasdaq Composite slipped the most, 1.12%, or 149.85 points, to a close of 13,227.70.

In their statements before the House financial services committee, both Ms. Yellen and Mr. Powell presented their optimistic outlook towards the US economy. They both said they expect a strong rebound and a quick recovery. The positive projection is attributed to the successful vaccine rollout, the release of the $1.9tn stimulus bill, and the lowering daily cases of Covid-19. However, according to Ms. Yellen and Mr. Powell, the US recovery is far from complete. Thus a lot more work needs to be done so that the job sector could return to pre-pandemic levels.

Inflation Fears Eased

On inflation, the topic that concerns investors the most, Mr. Powell said he does not expect the $1.9tn economic aid to lead to a sharp rise in prices. And even if inflation picks up, the Fed chief reiterated the central bank has the necessary tools to deal with rising prices. “We do expect that inflation will move up over the course of this year,” Mr. Powell said. “Our best view is that the effect on inflation will be neither particularly large nor persistent,” he added.

As the Congressional hearing took place, investors took on a risk-off approach to the market. US Treasury yields slid after Fed Chair Powell downplayed concerns that a quick economic recovery would spur an unwelcome rise in prices. “We have been living in a world of strong disinflationary pressures — around the world really — for a quarter of a century,” he said. “We don’t think a one-time surge in spending leading to temporary price increases would disrupt that.”

Jerome Powell also said that the Fed remained strongly committed to providing as much help as it takes so that the economy could recover even if that takes inflation over the standard 2% target for a brief period of time.

Treasury Secretary Janet Yellen said that the budget would need new revenues “to support the spending that this economy needs to be competitive and productive.” Ms. Yellen cited the preliminary infrastructure package with a price tag of $3tn that will be directed towards domestic needs and would require a tax hike so it could be funded. “A package that consists of investments in people [and] investments in infrastructure will help to create good jobs in the American economy and changes to the tax structure will help to pay for those programs.” Later in the week, President Joe Biden is expected to present more details over the new infrastructure and economic plan.

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