Powell muddies Fed’s monetary message to pacify markets for now

'No' Jerome Powell won't resign

US stocks rose higher on Wednesday after Federal Reserve Chairman Jerome Powell said that the gradual interest-rate hikes are meant to balance risks as it tries to keep the economy on track.

A new jobs report on Friday showed USA employers added more than 300,000 jobs in December - well above expectations.

"Despite this dovish tone, we are skeptical", Schenker said in a note.

"What does what is going on in the financial markets tell you about the fundamentals?" Technology stocks have recently been a laggard to major indices, but Friday saw the entire sector higher, with names like Netflix ($NFLX), Amazon ($AMZN), Google-parent Alphabet ($GOOGL), Facebook ($FB) and even Apple ($AAPL) all closing up more than 4 percent.

The tech-heavy Cheddar 50 Index, which measures the performance of Cheddar's 50 top companies ー from Apple ($AAPL) to GM ($GM) ー gained 5.4 percent on Friday, amid broader market gains.

Powell and his colleagues at the USA central bank are weighing conflicting signals on the US economy as they try to ensure that the Fed achieves its congressional mandate of low, stable inflation and full employment over the long term.

Compared to comments he made after the Fed raised rates last month, "it's not that he's changed his message. but that he explained it more patiently and in greater detail", said Lou Brien, market strategist at DRW Trading in Chicago. Powell said last week he wouldn't resign if the president asked him to step down.

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In December, Powell said that the Fed's balance sheet reduction was on "autopilot".

Her comments, from a sometimes hawkish Fed official, highlighted the change in tone at a central bank that, after two years of roughly quarterly rate increases, was now assessing the risks of going too far.

The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement. In the first event, the Labor Department's December jobs report showed the economy added a robust 312,000 jobs.

The two former central bank chairs also threw their support behind Powell and Fed independence following months of escalating criticism from Donald Trump. But it has been gradually reversing that stance over the past year, although the balance sheet still remains above $4 trillion.

Powell's willingness to be flexible on interest rates was welcome news to investors, many of whom anxious that Fed chair risked cutting off the current economic expansion by continuing to raise interest rates despite signs the US economy was cooling off a little.

Analysing the Fed statements, James Glassman, senior economist at JP Morgan said, "We have got very strong job news, the economy got lot of momentum to generate this kind of job news then why has the US Fed become cautious - it is because the inflation trends have been little more moderate".

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