The stock market is choppy Wednesday, but bonds are rallying after Fed chief Jerome Powell addresssed the difficulties of engineering a soft landing.
A soft landing will be “quite challenging,” but overtightening isn’t the biggest risk to the economy, Powell said in a panel discussion.
The S&P is right around tactical support levels of 3,800-3,838, according to BofA.
“Although filling the mid June weekly gap is tactical bullish, downside projections for SPX bear markets of 20% or more, recession related pullbacks and midterm year corrections coalesce near 3500 and 3200,” technical strategist Stephen Suttmeier said.
Six of 11 S&P sectors are higher, with Healthcare at the top. Industrials is the weakest performer.
“We do not believe the stock market has bottomed yet and we see further downside ahead,” George Ball, chairman of Sanders Morris Harris, said. “Investors should be holding elevated levels of cash right now. Stocks with high dividend yields and low volatility are a sound investment while we wait for the markets to bottom.”
“We see the S&P 500 bottoming at around 3,100, as the Federal Reserve’s aggressive, but necessary inflation-fighting measures are likely to depress corporate earnings and push stocks lower,” Ball said. “The Fed is likely to raise interest rates by 50 or 75 basis points at each of its meetings for the remainder of this year.”
Rates moved lower after Powell spoke. The 10-year Treasury yield is down 8 basis points to 3.13% and the 2-year down 2 basis points at 3.11%.
Q1 GDP declined more than initially thought as inflation increased. Q1 GDP came in at -1.6% compared to the forecasted -1.4%.
“GDP crib notes: slightly more inflation than previously estimated, material downward revisions to services consumption, and material upward (less negative contribution) revision from inventories,” strategist George Pearkes tweeted.