Powell’s Remarks Spark Concerns: U.S. Stocks Slide, Treasuries and Gold Rally

Market Overview

Federal Reserve Chair Jerome Powell stated yesterday that U.S. equity valuations are “quite high,” while reiterating the Fed‘s dual challenge of rising inflation and weakening employment. He did not provide a clear signal on whether a rate cut will occur in October. The comments ended Wall Street’s recent rally, with all three major indexes closing lower. The Nasdaq dropped nearly 1%, led by declines in technology and consumer discretionary sectors. The “Magnificent Seven” all retreated, with Amazon down more than 3%. In contrast, energy stocks advanced.

The uncertainty in Powells remarks boosted safe-haven assets. U.S. Treasury yields broadly declined, with longer-dated yields falling more sharply; the 10-year yield slid more than 4 basis points. The U.S. Dollar Index fell for a second consecutive day. In crypto markets, Bitcoin dipped 0.7%, consolidating near the lows. Commodities saw strong moves: spot gold hit another record high, climbing as much as 1.2% toward $3,800. Meanwhile, crude oil prices rebounded sharply after four straight days of losses, with WTI crude surging more than 3.2% intraday amid escalating NATO-Russia tensions.

Hot Topics Ahead

• Powell Flags Elevated Equity Valuations

• Powell noted that interest rates remain “moderately restrictive” as the Fed navigates the twin risks of higher inflation and softer labor markets. He emphasized that tariff effects should be one-off price shocks and must not become persistent. Importantly, he did not indicate whether he supports a rate cut next month. During Q&A, he highlighted that by many measures, stock valuations are “quite high.” The major indexes hit session lows, with the Nasdaq down more than 1%. According to the “New Fed Wire,” Powell‘s comments leave the door open for rate cuts. He indirectly responded to Besant’s criticism, stressing that the U.S. economy has remained resilient post-financial crisis and post-COVID.

• U.S. September Markit PMI Softens

• The preliminary Markit Manufacturing PMI fell to a two-month low, while the Services PMI and Composite PMI both dropped to three-month lows, though all remained above the 50 expansion line. Growth momentum has slowed from July‘s recent peak, with firms also trimming hiring in September. Signs of softening demand are mounting, eroding companies’ pricing power. This suggests margins are under pressure but also supports the view that inflation is moderating.

Key Events to Watch

• 22:00 (GMT+8) U.S. New Home Sales (Annualized, August)

• 22:30 (GMT+8) U.S. EIA Crude Oil Inventories (Week Ending September 19)

• 04:10 (GMT+8) San Francisco Fed President Mary Daly (2027 FOMC voter) speaks