Stocks open higher before Powell’s testimony

US stocks advanced ahead of the second day of Federal Reserve Chairman Jerome Powell’s testimony after he warned that a rapid rise in interest rates threatens to trigger a recession.

The S&P 500 gained 0.4% in early trading Thursday. The high-tech Nasdaq Composite Index is up 0.4% while the Dow Jones Industrial Average is also up 0.4%.

Investors have mostly dumped riskier assets in recent days, spurred by mounting concerns that the Federal Reserve’s efforts to control inflation will negatively affect the economy. Investors are becoming less optimistic about the Fed’s ability to engineer a so-called soft landing, in which interest rates rise to curb inflation without pushing the economy into recession.

the master. Powell acknowledged those risks in testimony to lawmakers on Wednesday, saying a recession is possible and that an easy landing for the economy would be “very hard.” the master. Powell is scheduled to continue that testimony Thursday before a second group of lawmakers.

Federal Reserve Chairman Jerome Powell said interest rates will continue to rise until the central bank sees clear evidence that inflation is slowing, but acknowledged that higher interest rates could lead to a recession. Photo: Elisabeth Franz/Reuters

The S&P 500 closed 0.1% lower on Wednesday after Mr. Powell comments, while the Dow Jones Industrial Average lost 0.2%.

“Markets are in real volatility right now,” said Stephen Innes, managing partner at SPI Asset Management. “I don’t think the market is heading into bullish territory by any means.”

Big tech companies were leading the initial gains, with NvidiaAnd the

Snap and Amazon both rose about 0.9%.

The Labor Department said 229,000 Americans applied for unemployment benefits last week. Unemployment claims – one of the first signs of weakness in the labor market – remain at historically low levels. A measure of activity in the manufacturing and services sectors is due shortly after the opening bell.

In the bond markets, Treasury yields fell for a second day despite remaining close to their highest level in more than a decade. The yield on the 10-year US Treasury fell to 3.099% from 3.155% on Wednesday. Bond yields fall as prices rise.

The US dollar strengthened, with the WSJ Dollar Index, which measures the currency against a basket of other currencies, up 0.1%.

In Europe, the Stoxx Europe 600 was flat. Business surveys released on Thursday showed the European economy slowed sharply in June as rising consumer prices eroded demand for a range of goods and services.

Inflation is central to all of this, but there is lackluster growth, and interest rates are rising. “All together it is a horrible cocktail and you just have to step aside and wait for it to work itself out,” said Hani Reda, portfolio manager at PineBridge Investments.

Trader at the New York Stock Exchange on Wednesday.


Pictures:

Brendan McDermid/Reuters

European gas prices jumped after Germany took a step closer to rationing gas by launching the second step of an emergency plan to deal with shrinking Russian supplies. Gas prices in the region rose more than 5% to €134.25 an hour, the highest level since March.

Bitcoin is up 3.9% from the 5pm ET level on Wednesday to $20668.90. The cryptocurrency has stabilized in recent days after a sharp sell-off earlier in the month.

In the commodity markets, oil prices fluctuated after sharp losses on Wednesday. Brent crude, the international oil standard, fell 0.5% to $108.16 a barrel. Other commodities whose demand is closely related to the economy also declined. Copper prices in London fell 2.6% to $8,555.50 per metric ton.

Rising energy prices have been a major factor in the high inflation for several decades that is currently roiling global economies. Al-Sayed said that concern that a recession could erode demand for oil has prompted investors to sell the commodity. Satisfaction.

“I’ve said for a while that there will be no bottom in equities without a sustainable top in oil prices and bond yields,” he said. “I think this is probably in the works.”

In Asia, stock markets are mostly up. In Hong Kong, the Hang Seng Index is up 1.3% while the Shanghai Composite Index in mainland China is up 1.6%. In Japan, the Nikkei 225 was up 0.1%.

Write to Will Horner at william.horner@wsj.com

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