This week (22-26), the New York Stock Market is expected to continue a volatility market while keeping an eye on the trends in US Treasury yields.
Since Jerome Powell, chairman of the Federal Reserve (Fed), is scheduled to appear several times, interest rates may fluctuate.
Major indicators such as the Personal Consumption Expenditure (PCE) price index in February are also released, and comments from other Fed officials are pouring out.
The trend of US Treasury yields is still a key driver in the global financial market.
Although the stock market’s resistance to rising interest rates has grown somewhat, the volatility of interest rate fluctuations, mainly technology stocks, is still high.
Although the Fed has repeatedly confirmed its policy of maintaining low interest rates for a long period of time, market concerns remain. The US Treasury bond yields rebounded for a while when the Fed, including Chairman Powell, expressed a easing view, and then quickly rose again.
Unlike the Fed’s proclamation of temporary inflation, the market expects inflation to continue to rise, and the possibility that the interest rate hike will be faster than the Fed’s current plan is reflected in the price. The Fed’s position to allow some overheating of inflation rather acts as a factor that intensifies anxiety about inflation.
The situation is not expected to be resolved easily this week.
Chairman Powell is scheduled to appear one after another from the beginning of the week through discussions and testimony to the parliament. They will discuss at the International Bank for Settlement (BIS) summit on the 22nd, and testify in the House of Representatives with Finance Minister Janet Yellen on the 23rd. On the 24th, he attends the Senate.
However, considering the situation up to last week, it is unclear whether Chairman Powell will be able to calm the rise in interest rates. Even if interest rates temporarily fall back in response to Chairman Powell’s remarks, it is highly likely that anxiety over the possibility of a rebound will continue.
Fed vice chairman Richard Clarida and New York Fed governor John Williams are also pouring out comments from other key figures, so the fluctuations in interest rates may increase. Fed officials generally expressed their position that rising interest rates are a natural phenomenon due to improved economic outlook.
The February PCE indicator will also be released to gauge the consumption and inflation situation in the United States.
Consumption expenditure in February may be somewhat sluggish due to the cold wave and heavy snow that hit the entire United States. However, as the economic resumption proceeds smoothly due to the rapid supply of vaccines, and additional stimulus measures have begun, temporary sluggish consumption due to the weather is unlikely to have a significant impact on the market.
The key is the PEC price index released together. This is an inflation index that the Fed uses as a standard.
Wall Street’s general view is that inflation would not have risen significantly until February. According to the Wall Street Journal, experts predicted that the core PCE price index would have risen 1.5% year-on-year. It also rose 1.5% in January.
If inflation rises more than expected, market uncertainty may intensify.
The situation of the novel coronavirus infection (Corona 19) in Europe should also be noted.
New infections are rapidly increasing again due to the spread of the mutant virus in Germany, Italy, and France. Some areas have reinforced the blockade due to the so-called’third epidemic’ concern.
It is also a burden that the confrontation between the US and China may not be easily resolved by the Joe Biden government.
The two countries confirmed a profound conflict last week, such as failing to make a joint announcement at the annual high-level talks for the first time since the inauguration of US President Biden.
Last week, the New York stock market fell amid unrest in the government bond market.
The Dow Jones 30 Industrial Average fell by about 0.5%. The Standard & Poor’s (S&P) 500 index and Nasdaq fell by 0.8%.
(Photo = Yonhap News)