Volatility persists after Powell’s hawkish comments

US stock indices turned lower last week as Federal Reserve Chairman Jerome Powell’s testimonies revived fears of more aggressive rate hikes this year. The SP 500 fell 2.1% erasing previous week’s 0.6% gain and the ICE dollar index inched up 0.03%.

The SP 500 ended lower every session except Monday and Friday last week. It tumbled 1.3% Tuesday after Powell’s upbeat assessment of US economy. The SP 500 extended losses 1.1% Wednesday, and slumped 1.3% Thursday as President Trump announced his intentions to put tariffs on steel and aluminum imports. The broad market index ended 0.5% up Friday.

The ICE dollar index retreated in every session except Tuesday and Wednesday last week. It rose 0.6% Tuesday after Powell’s comment the “inflation is moving up to target” and the US economy is strengthening. The dollar index added 0.3% Wednesday. It fell 0.5% Thursday as President Trump announced tariffs of 25% for steel and 10% for aluminum imports. The dollar slid another 0.3% Friday as President Trump threatened reciprocal taxes on US imports in his tweet.

Three major central banks are meeting this week. The Reserve Bank of Australia will announce its monetary policy decision on Tuesday. The European Central Bank meets on Thursday, and Bank of Japan monetary policy decision will be announced on Friday. No policy changes are expected. However, the ECB Governing Council may discuss how it sees the exit from the quantitative easing. And US monthly payrolls data due Friday will be closely watched for indications of further improvement in labor market.