U.S. stock indices fell on Monday, March 21, amid hawkish comments from Federal Reserve Chairman Jerome Powell. If last week the market marked his actions with a small rally, now the reaction to his words was cautious.
U.S. Federal Reserve Chairman Jerome Powell. Photo: CNBC
Dow Jones is down 0.58%. The S&P 500 and Nasdaq broad market index lost 0.04% and 0.4%, respectively.
Jerome Powell embarrassed the Dow Jones
Speaking on the sidelines of the National Association for Business Economics, the Fed chief said his agency was ready to raise interest rates in half-percent increments
We are ready at any moment “to adjust our policy by accelerating interest rates if necessary” in order to curb the biggest inflationary acceleration in 40 years.
The yield on benchmark 10-year Treasury bonds rose to 2.315 percent from 2.146 percent on Friday, reaching its highest level since May 2019. That’s not to say bonds look like phenomenal investments at this point, but they are definitely more balanced than they were at the beginning of the year.
Oil prices are solidly over $110
West Texas Intermediate (WTI) has surpassed $111 a barrel, with a daily gain of more than 7%. North Sea international benchmark Brent futures gained 8%, with price tags approaching $117.
Shares of oil companies are saving the market
On that background the positive impulse was received by the shares of oil companies. Occidental Petroleum (OXY) gained 8.39% at once, closing above the psychological level of $60. Hess (HES) added 6.61%. ExxonMobil (XOM), the largest U.S. oil corporation by capitalization, gained 4.49%.
Buffett Expands Insurance Business
Shares of insurer Alleghany (Y) soared nearly 25% after the announcement of its takeover by Warren Buffett’s financial conglomerate Berkshire Hathaway (BRK). Contrary to the tradition in which the buyer’s stock is under pressure and declines in such cases, Berkshire securities of both classes (A and B) showed a two percent increase.
Recall that the holding company has been a net seller of shares throughout 2021. As a result of buying passivity, Berkshire’s cash stock has nearly doubled over the past five years. The company ended 2021 with more than $146 billion in cash or cash equivalents. By comparison, that figure was just under $75 billion in 2016.