U.S. equities fell on Friday after the chairman of the Federal Reserve signaled some concern about inflation. The S&P 500 slid 0.1% and the Nasdaq 100 retreated 0.9% as Jerome Powell said the central bank was monitoring price pressures carefully and would adapt accordingly.
Global supply-chain constraints and shortages that have led to elevated inflation “are likely to last longer than previously expected, likely well into next year,” Powell said, while adding that “it is still the most likely case” that as those constraints ease.
Investors are increasingly concerned higher cost pressures and global supply-chain bottlenecks will push the Fed to raise interest rates faster than expected. However, a solid start to the earnings season had offset those fears with the benchmark S&P 500 topping a record on Thursday.
“The market is getting more worried that we are in some kind of a longer term inflation rise,” said Jim Bianco, president and founder of Bianco Research, on Bloomberg TV and Radio’s “Surveillance.” Stocks won’t like if the Fed responds to inflation and bonds won’t like it if they don’t, he said. “That’s not a good scenario.”
The 10-year U.S. Treasury yield fell to 1.64% but still remained higher for the week. The dollar edged lower, on track for a second week of declines. And gold gained.
The losses came after the S&P 500 struggled for a direction earlier in the session after disappointing tech earnings overnight. A warning on ad spending from Snap Inc. wiped out more than $100 billion of market value from the social media company and its peers including Facebook Inc., Google-owner Alphabet Inc., Pinterest Inc. and Twitter Inc.
