The Dow Jones Industrial Average snapped a 5-day win streak on Mon, as Fed Chair Jerome Powell said inflation is too high. The Dow lost 201.94 pts or 0.58%, to close at 34,552.99. The S&P 500 index fell 0.04%. The tech-heavy Nasdaq Composite retreated 0.4%. The small-cap Russell 2000 dropped 0.97%.
Boeing (BA US, -3.59%) shares fell on Mon after a Boeing 737-800 NG plane operated by China Eastern Airlines (670 HK, -6.46%) crashed in China’s Guangxi province.
Warren Buffet’s Berkshire Hathaway (BRK/B US, +2.12%) will buy insurer Alleghany Corp (Y US, +24.8%) for $848.02 per share in cash, or US$11.6b.
After the bell, Nike (NKE US, -0.80%) shares soared 5.31% after reporting quarterly revenue that beat analysts’ projections. Nike’s revenue outpaced expectations in all regions, including China, where sales fell less than predicted.
In prepared remarks for the National Association for Business Economics, Powell said, “The labor market is very strong, and inflation is much too high.” He added, “if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”
Derivative markets now reflect about 7.5 quarter-point rate hikes at the remaining six Fed meetings this year, indicating more than one half-point rise.
The yield on the 10-year Treasury note jumped 14.02 basis points (bps) to 2.2896%, the highest since Mar 2020. The yield curve flattened dramatically. The 2-year Treasury yield is only 13 bps lower than the 10-year.
Germany’s 10-year government bond yield, the benchmark of the bloc, rose 8 bps to 0.454%, its highest level since Nov 2018. Data from the Federal Statistics Office showed producer prices increasing 25.9% yoy.
The front-month Brent and WTI futures closed up $7.69 at US$115.62/bbl and $7.42 at US$114.33/bbl respectively. The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, rose 0.27% to 98.498.
The most actively traded US gold futures (Apr) contract settled up $0.2, or 0.01%, at US$1,929.50/oz. May silver, which is the most actively traded silver futures, rose 22.6 cents, or 0.9%, to end at US$25.313/oz.
European equity markets finished mixed on Mon. The UK FTSE gained 0.61%, France's CAC 40 fell 0.57%, while the German DAX retreated 0.6%.