Following a 25 basis points increase in interest rates this week, Fed Chair Jerome Powell assured in his press conference that “all depositor savings” in the United States are safe.
Was Powell behind the recent sell off in stocks?
That came as bit of a relief for markets after the recent bank failures. Powell’s remarks were also in line with what Treasury Secretary Janet Yellen told the American Banker’s Association just a day earlier.
But then she entirely went another way as she testified before Congress on Wednesday. According to Quincy Krosby – Chief Global Strategist at LPL Financial:
She did a complete 180, suggesting not all depositors would be made whole in the event of a run. Last thing markets need now is confusion and reneging from its top government officials, but that’s exactly what happened.
Krosby sees a near-term bounce in U.S. stocks
Contradiction between Powell’s and Yellen’s remarks and the associated confusion has pushed the S&P 500 down nearly 2.0% versus its high on Wednesday.
On the plus side, though, Krosby says a relief rally may be coming. Explaining why, she wrote:
Algorithms move instantly and the response was immediate. Markets are in oversold territory today and due for a possible bounce, and that may provide relief from a sell-off wrought by careless words from a top official.
Earlier this week, LPL’s technical strategist Adam Turnquist had laid out reasons to remain bullish on U.S. stocks as well (read more). Versus its year-to-date high, the equities market is down over 5.0% at writing.
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Wajeeh Khan
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