This week, investor sentiment and subsequent market movements were driven by the prospect of additional Fed rate hikes and growing recession fears. U.S equities saw another turbulent week, while investors sought relative stability in bonds, currencies, and gold.
Cautious investor sentiment weighed on Wall Street Monday, as the Dow just ended another down week, marking its seventh consecutive drop. While all three major indices finished lower Monday, gold was modestly higher. The yellow metal rose about $15 an ounce, reaching $1,826 by Monday’s close. Silver rose by 2% on the same day, touching $21.61 an ounce.
Having recently been confirmed for his second term as Fed Chair, Jerome Powell made remarks on Tuesday, regarding Fed policy amid record inflation. In his Tuesday speech, Powell noted that the central bank would continue to pursue higher interest rates until he sees, “clear and convincing evidence that inflation pressures are abating and inflation is coming down.”
Powell also noted that even more aggressive action is on the table if inflation does not show signs of slowing. Following Powell’s speech, U.S. equities rallied, while gold and silver were flat, near $1,821 and $21.84, respectively.
The Dollar Index bounced from two-week lows on Wednesday, following Powell’s verbal doubling-down on hawkish monetary policy. While Wall Street saw gains on Tuesday, many were skeptical that this represented a turning point in bearish momentum, given prevailing concerns that economic slowdowns coupled with high inflation, could result in stagflation.
Investor caution persisted into Wednesday, which resulted in the Dow’s worst decline since 2020. The S&P 500 shed over 4% on the same day, while the Nasdaq lost 4.6%. Dismal quarterly earnings and significant losses from companies like Target were among the biggest detractors.
During Wednesday’s sell-off, investors flocked to bonds, driving both the 10-year and 30-year Treasury notes lower. Gold benefited from the broad sell-off as safe-haven inflows drove the yellow metal back up to one-week highs just below the $1,850 mark.
A somewhat softer dollar has allowed gold to hold on to its momentum, for what is currently a 1.7% gain. Silver is currently near $21.74 an ounce, which is 2.6% higher for the week. If gold both metals maintain current levels, it would be the end of a four-week losing streak.
Meanwhile, stocks are lower again as discouraging corporate earnings continued to drive risk-off sentiment on Wall Street. As of now, the Nasdaq is on pace for a 6.1% loss, while the Dow may shed 4.9% on the week. According to Yahoo Finance data, the S&P 500 is on track for its longest losing streak since 2001.
