US stocks waver as Fed chief addresses Congress again

Powell says US 'can't fail' in beating record-high inflation and that recession not 'inevitable'

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Stocks gave up an early gain and turned mixed in afternoon trading on Wall Street on Thursday as Federal Reserve Chairman addressed Congress for the second time and as investors remained focused on inflation and rising interest rates.

The S&P 500 was down 0.2 per cent as of 12.45pm EST. It was up as much as 1 per cent earlier. The Dow Jones Industrial Average fell 137 points, or 0.4 per cent, to 30,349 and the Nasdaq rose 0.3 per cent.

Major indexes are still on track for weekly gains. Trading has been turbulent in recent weeks and the benchmark S&P 500 has fallen for 10 of the last 11 weeks. Stocks have swung between sharp gains and losses as investors try to determine whether a recession is looming.

The Fed is attempting to temper inflation’s impact with higher interest rates, but Wall Street is worried that it could go too far in slowing economic growth and actually bring on a recession.

Investors are monitoring Fed Chairman Jerome Powell’s second day of testimony to Congress. He spoke before a House of Representatives committee on Thursday, a day after testifying to a Senate committee.

“Our whole framework is about keeping inflation expectations well and truly anchored,” he said on Thursday.

Mr Powell emphasised the importance of getting inflation down to the Fed’s goal of 2 per cent.

“We can’t fail on this,” he said.

The Fed chairman has previously acknowledged that a recession is “certainly a possibility” and that the central bank is facing a more challenging task amid the war in Ukraine essentially pushing oil and other commodity prices even higher and making inflation even more pervasive.

On Thursday, Mr Powell stressed: “I don’t think that a recession is inevitable.”

He spoke to Congress a week after the Fed raised its benchmark interest rate by three quarters of a percentage point, its biggest increase in nearly three decades.

Fed policymakers also forecast a more accelerated pace of rate increases this year and the next than they had predicted three months ago, with its key rate to reach 3.8 per cent by the end of 2023. That would be its highest level in 15 years.

Earlier on Thursday, the Labour Department said fewer Americans had applied for jobless benefits last week, though it was slightly more than economists expected. The solid job market is a relatively bright point in an otherwise weakening economy, with consumer sentiment and retail sales showing increasing damage from inflation.

Companies are signalling slower-than-expected growth, however, surveys from IHS Markit showed.

While weak economic data is discouraging for the broader economy, it could also mean that the economy is already slowing enough to allow the Fed to ease up on its planned rate increases.

Inflation remains stubbornly high, squeezing consumers with higher prices on everything from food to clothing.

The pressure has been worsened by record-high petrol prices that show no sign of abating amid a supply and demand disconnect.

Updated: June 24, 2022, 3:36 AM