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Markets end the day higher after Fed Chair Powell's testimony before Congress

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  • Markets ended the day higher Wednesday after Federal Reserve Chair Jerome Powell testified before Congress.
  • Wall Street started off slightly higher but then shifted firmly into the green after Powell said the Fed has likely reached its peak rate for this cycle.
  • He told lawmakers "it will likely be appropriate to begin dialing back policy restraint at some point this year.”
  • After rolling out 11 rate hikes that punished consumers, froze the housing market and stymied business activity, the central bank said last year it intended to pull back on that aggressive action and start to cut rates.
  • However, the Fed chief crushed the market's hopes last month when he said the first rate would not be coming in March, potentially pushing the timeline into summer or beyond.
  • As Powell spoke Wednesday on the impact of rate hikes on the economy, regional lender NYCB revealed that it had swapped out its newly installed CEO and secured a billion-dollar lifeline, after struggling in recent weeks.

4:36 p.m. ET, March 6, 2024

Minneapolis Fed President Neel Kashkari isn't ruling out interest rate hikes

There could be a scenario where the Federal Reserve raises interest rates again, said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, in a discussion at the WSJ CFO Network Summit in New York City on Wednesday afternoon.

"I think the base case scenario is we don't have further raising of the federal funds rate to go," he said.

If the economy continues to be resilient and if inflation remains more entrenched than policymakers officially thought it was, "the first thing we would do is keep rates where they are in for an extended period of time, indefinitely, as long as necessary to try to bring inflation back down to our 2% target," he said.

Still, he said, he isn't ruling out any more interest rate hikes. "If inflation starts to flare back up again, that could justify us going and raising rates further from here," he said.

The economy remains strong, he said, and the Fed has "time to get more data before we start dialing back policy."

4:02 p.m. ET, March 6, 2024

Markets close higher after Powell testimony

Federal Reserve Chair Jerome Powell testifies at a House Financial Services Committee hearing in Washington, DC, on March 6. Bonnie Cash/Reuters

US stocks ended the day up following two consecutive losing sessions on Wall Street.

Markets bounced higher as tech stocks rebounded and as investors digested comments from Federal Reserve Chair Jerome Powell that interest rate cuts are likely this year.

The blue-chip Dow Jones Industrial Average was up 76 points, or 0.2%. The S&P 500 gained 0.5%, and the tech-heavy Nasdaq Composite was 0.6% higher.

The Dow was up by more than 200 points in midday trading before paring back gains later in the afternoon.

Speaking before the House Financial Services Committee, Powell said he believes the Fed's policy rate is likely at its peak and will dial back interest rates this year. But Powell cautioned that the economic outlook is still uncertain.

San Francisco Fed President Mary Daly, meanwhile, said that Fed policy is in a good place but that holding rates high for too long could hurt the economy.

Treasury yields dipped slightly but remained mostly steady on the news.

Shares of New York Community Bank also gained 7.5% on Wednesday after falling to multi-decade lows just hours before. The beleaguered bank announced that it had received a $1 billion lifeline in the form of an equity investment led by former Treasury Secretary Steven Mnuchin's company, Liberty Strategic Capital, Hudson Bay Capital and Reverence Capital Partners.

Gold finished the day up 0.8%, at a fresh record and bitcoin futures continued to climb, gaining more than 8%. 

Shares of Apple, meanwhile, fell 0.6%, dropping for the sixth day in a row as the tech giant grapples with reports that sales of the iPhone plummeted 24% in china.

As stocks settle after the trading day, levels might change slightly.
3:26 p.m. ET, March 6, 2024

CEO economic outlook gauge rises to highest level since 2022

Optimism is brewing among corporate America's top brass — and just hit the highest levels in nearly two years.

More CEOs say their firms are ramping up investments, bringing on new hires and registering greater sales so far this year than in the final three months of 2023, according to a survey released Wednesday by the Business Roundtable.

The influential lobbying group of US executives said its CEO Economic Outlook Index jumped to a reading of 85 during the first quarter, up from 74 during the fourth quarter of last year. The latest index landed above the historic average of 83 and is the highest quarterly reading since the second quarter of 2022.

The 159 CEOs surveyed by the Business Roundtable also projected that the US economy would grow by 2.1% this year. This time last year, they anticipated GDP growth of 1.9% for 2023, which ultimately grew by 2.5%, according to Commerce Department data.

“This quarter’s survey results underscore the resiliency of the US economy and suggest accelerating economic activity over the next six months," Chuck Robbins, Cisco Systems CEO and chair of the Business Roundtable, said in a statement. "To further strengthen the economy, the US needs to double down on policies that spur domestic investment and bolster American competitiveness."

3:15 p.m. ET, March 6, 2024

Markets cool off after Powell speaks

Wall Street exhaled Wednesday, after Federal Reserve Chair Jerome Powell mostly stuck to the script during his semiannual testimony before Congress.

The Dow was up by 25 points, or 0.07% by mid-afternoon. The S&P rose 0.45% and the Nasdaq Composite was 0.6% higher.

While investors had been hoping for more clarity from the Fed chair on when exactly the central bank would start to implement rate cuts, they breathed a sigh of relief that Powell was not overly hawkish in his assessment of the economy and the viability of rate cuts.

3:34 p.m. ET, March 6, 2024

$1 billion capital injection for NYCB will help the bank weather the storm, analyst says

A person walks by a New York Community Bank in Brooklyn, New York, on February 8. Spencer Platt/Getty Images

New York Community Bank’s ability to raise $1 billion from a group led by former Treasury Secretary Steven Mnuchin should significantly help the embattled regional bank get through this crisis, KBW managing director Christopher McGratty told CNN.

“You should feel better about the company surviving,” McGratty said in a phone interview as the news was announced. 

Although this capital infusion is “tough” for existing shareholders because they will be diluted, McGratty said it amounts to a major investment, given the bank’s size. 

NYCB’s market value stood at just $1.3 billion on Wednesday before the equity investment was announced. 

“This is a tremendous amount of capital to hopefully put the problem behind them,” McGratty said. “This would put the company in a much better position to weather the storm.”

2:05 p.m. ET, March 6, 2024

NYCB stock nosedives on report that the bank is seeking major cash infusion

As Federal Reserve Chair Jerome Powell spoke Wednesday on the impact of high interest rates on the economy, shares of New York Community Bank (NYCB) plunged by more than 40%.
This came after The Wall Street Journal reported that the beleaguered regional lender is seeking a major cash infusion.

The report, citing people familiar with the matter, said bankers are actively trying to “gauge investors’ interest in buying stock in the company.”

Around 12:30 pm ET the stock was halted from trading pending imminent news.

All of this raises more questions over whether the Long Island-based bank is seeing depositors pull their funds. In an update last month, the bank said that deposits were stable and had even increased slightly in the last quarter of 2023. That update came after NYCB reported a surprise loss last quarter in part because of soured commercial real estate loans.
Read more here.
12:41 p.m. ET, March 6, 2024

Markets soar even as Powell indicates Fed isn't ready to cut interest rates

People walk by the New York Stock Exchange on March 6. Spencer Platt/Getty Images

In his testimony Wednesday, Federal Reserve Chair Jerome Powell continued to indicate that the fight against inflation is not over.

Powell said that while he believes it will likely be appropriate to dial back interest rates sometime this year, the Fed still needs more confidence that inflation rates are moving towards the central bank's longterm goal of 2% before they pivot towards rate cuts.

The blue-chip Dow Jones Industrial Average was 221 or 0.6% higher. The S&P 500 was up 0.9%. The tech-heavy Nasdaq gained 1.2%.

"The market has seemingly once again ignored this data point as yields are down and stocks are rebounding this morning from the rout that occurred yesterday," said Alex McGrath, chief investment officer at NorthEnd Private Wealth.

Other analysts also weighed in on investors' positive reactions to Powell's hawkish stance.

“While the main message in Fed Chair Powell’s semiannual Monetary Policy Report to the Congress was unchanged from recent Fed communication, the tone and structure of the testimony had a hawkish tilt," said EY chief economist Gregory Daco.

"There wasn’t much market reaction to the testimony with investors looking to parse through Powell’s exchange with senators today and House Representatives tomorrow," he said.

Treasury yields dipped slightly but remained mostly steady during Powell's testimony.

12:23 p.m. ET, March 6, 2024

Powell doesn't see recession around the corner

Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee in Washington, DC, on March 6. Chip Somodevilla/Getty Images

Federal Reserve Chair Jerome Powell weighed in on the US economy's future Wednesday — and it sounded promising.

In response to a question from Rep. Al Green of Texas, Powell said the economy is expected to continue with its expansion at a solid clip this year. That's the broad expectation among economists and Fed officials, with the median projection for growth this year at a healthy 1.4% annualized rate, according to their December projections.

"I will say there's no evidence or no reason to think that the US economy is in, or in some kind of, short-term risk of falling into a recession," he said. "Having said that, though, there's always a meaningful possibility that an economy will fall into recession. I don't think that possibility is elevated at the current time."

Economic growth remains solid, the job market is still in good shape and rate cuts are likely this year. The Atlanta Fed is currently projecting first-quarter gross domestic product, the broadest measure of economic output, to register north of 2%. The government releases its latest jobs snapshot on Friday morning, and economists are expecting the US economy added a robust 200,000 jobs in February, with the unemployment rate holding steady at 3.7%, according to FactSet estimates as of Wednesday around noon.

A strong job market is key for powering consumer spending, which accounts for about two-thirds of the US economy.

2:34 p.m. ET, March 6, 2024

Lack of bank capital or executive compensation incentives weren't primary reasons why Silicon Valley Bank failed, Powell says

People line up outside the Silicon Valley Bank headquarters in Santa Clara, California, on March 13, 2023. Brittany Hosea-Small/Reuters

Lawmakers pressed Federal Reserve Chair Jerome Powell during his Wednesday testimony on why Silicon Valley Bank failed almost exactly a year ago.

"You could argue that it needed more capital, but I wouldn't say that was the proximate cause [of SVB's failure," Powell said.

In response to that, Republican Rep. Blaine Luetkemeyer said that many lawmakers are "concerned" that SVB and other bank failures last year are "being used as an excuse to raise capital."

In a fiery exchange with Democratic Rep. Rashida Tlaib Powell said he didn't feel that executive bank compensation incentives were a major contributing factor to the demise of SVB.

Powell said banks, for the most part, have improved their "liquidity position" since last year's bank failures but that it's something the central bank continues to encourage banks to work on.

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