Stock Market Highlights on May 12:
- Thursday was not a great day for investors as the Dow Jones Industrial Average fell again
- Jerome Powell, the Chairman of the United States Federal Reserve has warned that raising interest rates may cause some “pain” but it’s a necessary measure to combat inflation.
- President Joe Biden said that tackling inflation is his top domestic priority after Powell’s confirmation by the Senate. “The Fed will bring skill and knowledge needed at this critical time for our economy”.
Thursday was not a great day for investors as the Dow Jones Industrial Average fell again. This happened despite an intraday reprieve from earlier in trading, which had been largely caused by selling pressure on Wall Street due to ongoing worries over how well America will be able to handle its finances if they get too out-of-control with inflation rates at a historic high.
Investors fear another Great Depression just like during 2007 which now seems inevitable according to some people’s opinions now even though there are plenty who disagree.
The Producer Price Index for Final Demand increased 0.5% last month, in line with economists’ forecasts and rose 11% over the past year – exceeding expectations by a significant margin!
Stifel in a note said that “Nothing in yesterday’s or today’s report suggests the Committee will deviate from the implied increase of 50bps on June 15, although some are beginning to reconsider the possibility of 75bp increase,”.
The 3,800 level for the S&P 500 may be a sign that dips buyers are close but no one knows for sure when it will happen.
“We still believe the U.S. equity markets are closing in on a significant low for the year, but again this process may take more time and see more damage done before that materializes,” Janney Montgomery Scott said.
Jerome Powell, the Chairman of the United States Federal Reserve has warned that raising interest rates may cause some “pain” but it’s a necessary measure to combat inflation.
The worse outcome would be if prices continue speeding ahead without interruption and could lead us into an economic crisis.
“Nothing in the economy works, the economy doesn’t work for anybody without price stability,” Powell said. “We went through periods in our history where inflation was quite high … The process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels, and we know what that’s like. And that’s just people losing the value of their paycheck.”
It’s not a secret that the current U.S economy is facing one of the greatest inflation problems. This period is comparable to the 1970s and early 1980, when prices were rising at a rate of 14%.5% per year. However, this time around Federal Reserve Chief Jerome Powell has shown that he is willing to use harsh interest rates in order to try to stop any further growth within our financial system which could lead us down another slippery slope toward economic disaster like what happened 30+ years ago.
President Joe Biden said that tackling inflation is his top domestic priority after Powell’s confirmation by the Senate. “The Fed will bring skill and knowledge needed at this critical time for our economy”.