New York Stock Market Starts Weak Ahead of Powell and Yellen Remarks

Government bond yields fall... Large institutional investors likely to buy bonds in Q1
Kaplan, Dallas Fed President, says "Rate hikes needed in 2022"
Powell and Yellen scheduled to testify before House in afternoon

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market opened lower ahead of the congressional testimonies of Jerome Powell, Chairman of the Federal Reserve (Fed), and Janet Yellen, Secretary of the Treasury. U.S. Treasury yields are also declining as investors remain cautious about their remarks.

As of 9:45 a.m. local time on the 23rd, the Dow Jones Industrial Average was down 0.16%, the S&P 500 index fell 0.12%, and the Nasdaq index dropped 0.16%.

The 10-year U.S. Treasury yield was at 1.65%, continuing its weakness from the previous day.

The statements scheduled for this afternoon by Chairman Powell and Secretary Yellen could potentially impact the market.

In their previously released written responses, both reiterated their existing positions.

Secretary Yellen stated, "We expect to see full employment next year," while Chairman Powell mentioned again, "The economic recovery is faster than expected but still far from complete. The Fed will continue to provide the necessary support for economic recovery."

Lawmakers are expected to question them about the previously implemented $1.9 trillion stimulus package and the $3 trillion infrastructure investment plan reported the day before.

The Wall Street Journal anticipated that lawmakers would also inquire about the Fed’s recent decision to end the supplementary leverage ratio (SLR) exemption for large banks announced last week.

There is speculation in the market that U.S. Treasury yields could decline further. Wells Fargo projected that large institutional investors will purchase bonds as part of portfolio adjustments by the end of the first quarter.

Wells Fargo estimated that large institutional investors might buy approximately $25 billion worth of bonds by the end of the first quarter. Given that the S&P 500 index rose about 5% in the first quarter, it is expected that investors will reduce their equity holdings and increase bond allocations. If institutional investors move to buy bonds, Treasury yields will face downward pressure.

On the same day, Robert Kaplan, President of the Federal Reserve Bank of Dallas, advocated for the need to raise interest rates in 2022 during an interview with CNBC.

President Kaplan acknowledged that he was the FOMC member who predicted a rate hike in 2022 in the dot plot released last week. At that time, four FOMC members forecasted rate increases in 2022, but most Fed officials expected no rate hikes until 2023.

President Kaplan said that while inflation concerns are not significant, considering the economic recovery trend, the Fed will likely need to raise rates next year.

This content was produced with the assistance of AI translation services.