Powell Sticks to the Script, NYCB Whipsawed after $1 bln Equity Injection – US Market Wrap

Wall Street traders breathed a sigh of relief after Jerome Powell reiterated that, while a strong economy will keep officials on hold for the time being, he expects the Federal Reserve to cut interest rates this year.

Stocks and bonds advanced as investors interpreted his remarks as a “no news is good news” development. Traders also kept an eye on regional banks, with New York Community Bancorp erasing a 47% intraday loss and closing 7.5% higher on news that it was raising more than $1 billion in equity to boost investor confidence.

Powell stated in his congressional testimony that the risk associated with commercial real estate is “manageable.” The Fed Chair also stated that the central bank is likely to significantly alter its plan to require large lenders to hold more capital, a move that would be a major victory for Wall Street titans.

The S&P 500 reclaimed its 5,100 level, with technology stocks leading gains. Treasury 10-year yields fell by five basis points to 4.11%. The dollar fell. Bitcoin resumed its rally, hovering around $67,000.

Central bankers are currently debating when and how far they should lower interest rates. Cut too soon, and officials fear they will fuel an increase in economic activity, keeping inflation above 2% – the rate they consider appropriate for a healthy economy. Keep borrowing costs high for too long, and the economy risks entering a recession.