Powell's Remarks Send Shockwaves Through Markets: US Stocks, Gold, and Bitcoin Plunge Amid Renewed Inflation FearsFederal Reserve Chairman Jerome Powell's remarks last night cast a shadow over financial markets, triggering volatility and causing a short-term surge in the US dollar index. Spot gold prices extended their decline, US equities accelerated their downward trajectory in late trading, and Bitcoin experienced a sudden sharp drop, resulting in widespread losses across asset classes
Powell's Remarks Send Shockwaves Through Markets: US Stocks, Gold, and Bitcoin Plunge Amid Renewed Inflation Fears
Federal Reserve Chairman Jerome Powell's remarks last night cast a shadow over financial markets, triggering volatility and causing a short-term surge in the US dollar index. Spot gold prices extended their decline, US equities accelerated their downward trajectory in late trading, and Bitcoin experienced a sudden sharp drop, resulting in widespread losses across asset classes. This market turmoil underscores investor anxieties about inflation and the future direction of the Fed's monetary policy.
Major US Indices Close Lower
Following Powell's speech, all three major US stock indices closed lower. The Nasdaq Composite fell 0.64%, the S&P 500 dropped 0.6%, and the Dow Jones Industrial Average declined 0.47%. Performance among large-cap tech stocks was mixed. Tesla's share price plummeted over 5%, pushing its market capitalization below $1 trillion. Google and Amazon both saw their share prices fall by more than 1%, while Meta Platforms (Facebook's parent company) experienced a modest decline.
Significantly, the Nasdaq Golden Dragon China Index closed down 1.81%, with popular Chinese stocks experiencing widespread losses. Bilibili fell over 12%, Xpeng Motors dropped more than 5%, NIO declined over 3%, JD.com fell over 6%, and Alibaba dipped over 1%. This collective downturn in Chinese stocks further exacerbated negative market sentiment.
Bitcoin Plunges Below $87,000
The cryptocurrency market also felt the impact. Bitcoin experienced a sharp drop, falling below $87,000 per coin intraday, representing a near 4% decline. This highlights the significant negative influence of changing macroeconomic conditions on the cryptocurrency market.
Powell: Fed Doesn't Need to Rush into Rate Cuts
In his remarks, Powell emphasized that the Fed doesn't need to rush into lowering interest rates, given the "very strong" recent performance of the US economy. He stated that the Fed would closely monitor inflation indicators to ensure they remain within an acceptable range. Powell noted, "The economy is not signaling to us that we need to rush to lower rates; the strength we're seeing now gives us the ability to be deliberate."
Powell's comments directly impacted market expectations regarding the Fed's upcoming monetary policy decisions. Federal funds futures trading showed a decreased likelihood of a 25-basis-point rate cut at the December meeting. By Thursday afternoon EDT, the probability had fallen to around 62%, down from an earlier 82.5%.
Inflation Data Meets Expectations, but Concerns Remain
The US reported a 0.2% increase in the Producer Price Index (PPI) for October, aligning with market expectations. Wednesday's release of October's Consumer Price Index (CPI) also met forecasts, but the data revealed that the Fed's fight against inflation hasn't achieved complete victory. Core CPI rose 0.3% for the third consecutive month, with a year-over-year increase of 3.3%.
Persistently high inflation remains a major source of market concern. Powell's emphasis on "deliberate" action also suggests the Fed will continue to monitor inflation trends, leaving future monetary policy uncertain.
Summers Warns: Trump Policies Could Spark Severe Inflation
Former US Treasury Secretary Lawrence Summers expressed concern about the future trajectory of the US economy. He believes that if President-elect Trump delivers on his campaign promises, the US will face another severe inflation crisis. Summers pointed out that Trump's pledged domestic tax cuts, increased tariffs, and deportation of undocumented immigrants would severely negatively impact the US economy.
Summers' warning further fueled market anxieties about future inflation. Investors need to closely monitor US economic data and policy changes to mitigate potential risks.
Market Outlook: Cautiously Optimistic, Focusing on Inflation and Monetary Policy
Following Powell's speech, market sentiment is cautiously optimistic. While US stocks, gold, and Bitcoin experienced declines, the drops were relatively limited. This suggests the market had already anticipated the Fed's policy direction to some extent. However, persistently high inflation and the uncertainty surrounding the Fed's future monetary policy remain major risks for investors.
Future market trends will depend on several factors, including US economic growth rates, inflation levels, the Fed's monetary policy, and geopolitical risks. Investors need to closely monitor changes in these factors and develop prudent investment strategies. In the short term, market volatility is likely to persist, requiring caution from investors. In the long term, the US economic fundamentals remain relatively robust, but persistent inflationary pressure and potential policy uncertainty pose significant challenges.
In conclusion, yesterday's market fluctuations reflect investor concerns about inflation and the Fed's monetary policy. While Powell's speech didn't trigger a panic sell-off, it did increase market uncertainty. Future market trends will remain subject to multiple influences, requiring close monitoring and careful handling by investors. Persistently high inflationary pressure and potential policy risks will be key factors influencing market movements. Investors need to remain vigilant and proactively adjust their investment strategies to address potential market risks. The complexity of the macroeconomic environment dictates that markets will continue to experience volatility, making rational investment and risk management crucial.
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