S&P 500 bleeds to fresh lows on the day back of hawkish Fed Powell

Stocks on Wall Street are bleeding out into the midday New York trade following Federal Reserve Chief Jerome Powell's comments made in a speech to the Jackson Hole central banking conference in Wyoming. He suggested the central bank will keep raising interest rates to tame inflation. The US economy will need tight monetary policy "for some time" before inflation is under control, he said.

The Fed is very clearly dependent on data and Powell said that while the US economy is slowing, he argues that it still has strong underlying momentum. For instance, and crucially, Powell explained that while ''July's lower inflation readings are ‘welcome’,'' they are ''short of what will be needed before we are confident inflation is moving down.''  

Investors were looking for clues as to whether the Fed was content with the less inflationary results in the data of late, but the speech from Powell shows little concrete evidence of that. In fact, he focused on not loosening policy too early but he didn't mention going any further on a hawkish side.

He did say that ''as policy tightens further, it will be fitting to halt the pace of rate rises at some time,'' however, that is somewhere over the horizon. Instead, he argues that ''restoring price stability will likely require maintaining a restrictive policy stance for 'some time.''' As a consequence, the Fed funds futures are showing odds of a 75bps hike in September now 56.5% vs 46.5% before Powell's speech.

From the moments just before the release of Powell's remarks at 1000 EDT, until now, the S&P 500 had fallen around 1.5%. It was roughly flat before the chairman's remarks. The index is now down 1.9% and has printed a fresh low for the day of 4,106.45. 

meanwhile, data earlier showed US consumer spending barely rose in July, but inflation eased considerably, which is yet another data input that could give the Fed room to scale back its aggressive interest rate increases.