Wall Street in search of direction with inflation in focus

Wall Street is looking for direction on Wednesday, with indices trying to break out of the previous two-day slump after a slightly larger than initially estimated US GDP contraction in the first quarter of the year, which boosted investor fears that The onslaught of inflation “hurts” the world’s largest economy and “gnaws” corporate profits.

On the board, the industrial index adds 115.11 points or 0.37% and stands at 31,062.10 points, the broader S&P 500 strengthens by 0.27% and moves to 3,831.70 points, while the Nasdaq technology index rises 0 , 14% at 11,197.36 points.

The market climate was cautious before today’s session even began, as it was preceded by a disappointing final measure of the growth rate of the US economy in the first quarter of the year. The data showed that the contraction of the US economy in early 2022 was slightly higher than previously announced

In particular, US GDP shrank at an annual rate of 1.6% as shown by the final data, declining for the first time since the outbreak of the pandemic in early 2020. The initial measurement showed a slightly smaller decline of 1.5% of GDP .

Investor skepticism, meanwhile, has been fueled by comments from central bankers from around the world during the European Central Bank’s annual conference on the other side of the Atlantic, attended by non-ECB chief Christine Lagarde and The Federal Reserve, Jerome Powell, the head of the Bank of England, Andrew Bailey, and other central bankers.

Investors are trying to glean central bankers’ positions in order to understand how central banks intend to move along the way, given their stated intention to tame galloping inflation.

The chairman of the Federal Reserve, Jerome Powell, speaking today at the ECB conference, reiterated that the US economy is in a “strong state” and the central bank can reduce inflation to 2%, while maintaining a stable labor market, despite all this work has become more difficult in recent months.

“We hope that growth will remain positive,” Powell said during a discussion Wednesday at the European Central Bank’s annual policy forum in Sintra, Portugal.

Household and corporate finances are also in good shape, and “overall the US economy is in a good position to withstand tighter monetary policy.” “Our goal is to raise interest rates without triggering a recession.” And we believe there are ways to achieve that, “Powell added.

For her part, ECB President Christine Lagarde stressed that the era of extremely low inflation that preceded the pandemic is unlikely to return.

Central banks need to adjust to significantly higher expectations for price increases, the ECB chief said, as reported by Reuters.