Powell Sends Market On Rollercoaster Ride

When the opening bell sounded Wednesday, the market was again below the psychological level of 3,900. This level on the S&P 500 futures has been the line in the sand all week. 

As the cash session began, it was apparent there was a big event to come later.

The price action ahead of the much-anticipated speech by Federal Reserve (Fed) Chairman Jerome Powell was very cautious.

Market price action was trading in a 15-point range all day on low, indecisive volume as the catalyst of Powell loomed.

Thirty minutes before Powell’s speech, the Federal Open Market Committee (FOMC) meeting notes were released and the market moved lower.

Rate hike stage set, market wild ride begins

The notes confirmed there would be a 75 basis point hike in the benchmark interest rate. This rate hike was expected unlike the possible100 basis point rate hike that many feared. Still, the market fell. 

After a sudden drop in the market, the market spent the next 30 minutes recovering the losses before Powell would take the stage.

By the time Powell was ready to deliver his speech, the market had reclaimed early losses and pushed to make new highs on the day.

Powell took the podium with the market near the high of the day and finished with the market making new lows.

Powell’s words set off violent market action 

One of the first things Powell stated that the market did not like was that “there is a fairly large group that would like to see 100 basis points by year-end.” This statement hinted that the hikes are not slowing down or stopping any time soon.

Another unexpected Powell comment was that some policymakers see 125 basis points by the end of this year.

Powell also mentioned that the chances of a soft landing for the economy are likely to diminish based on Fed actions. This means Fed policy needs to be more restrictive and possibly last longer. 

Everything Powell said was a sign that there are no plans to slow down or loosen monetary restrictions soon.

For the market, this means there could be more downside movement. The market immediately reacted negatively to Powell’s assessment and showed how the big players on Wall Street felt about the chairman’s comments.

Selling intensifies into the close

The S&P 500 and Nasdaq closed at the low for the day, facing selling pressure across the market.

The psychological target of 3,800 was hit in the S&P 500 futures at the end of the session. This level will act as the new line in the sand moving forward.

As the rocky day came to a close, the Nasdaq and the S&P 500 were negative. The S&P 500 futures closed down 2.03%, losing 79 points, while the Nasdaq futures closed down 2.26%, a loss of 271 points. The Dow followed, closing down 1.52%, declining 464 points.

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