Despite posting six consecutive gains, the S&P 500 still failed to meet expectations following remarks by a Federal Reserve official regarding inflation. Randal K. Quarles, a Federal Reserve governor, suggested that policymakers are willing to withdraw stimulus if price gains remain steady.
From its recent ascent beyond its September 2 record of 4,563.95, the US index dipped 0.4 percent at 4,536.19. Nevertheless, the index had a positive performance for the past three weeks, rallying 5.5 percent to offset its September losses, its worst monthly performance this year.
Fed officials throw caution to the wind
However, this rally was moderated Quarles’ insistence that the Federal Reserve is focusing its attention on skyrocketing inflation as prices surged beyond the Fed’s 2% target. Moreover, he also added that the Federal Reserve would respond accordingly if inflation remained high.
Mr. Quarles explained at the 2021 Milken Institute Global Conference that if inflation steadies at more than 2%, the FOMC will promptly deploy its tools and framework to address the price hikes.
Another Fed governor joined the fray and expressed a sentiment similar to Mr. Quarles. Christopher Waller reiterated that if inflation remains high for what remains of the year, the Fed will not hesitate to implement “an aggressive policy response” aside from tapering. This response could very well go on in 2022.
More Fed officials are throwing caution to the wind in anticipation of tapering, a process where it pares its large-scale bond purchases. Officials are also beginning debates on the best way to raise interest rates.
Tapering and raising interest rates are policies considered crucial to maintaining low borrowing costs and strong demand. As a result, investors keep a watchful eye on how the Fed is speeding things up on withdrawing support.
S&P 500 winners
There have been robust gains from high-profile businesses listed in the S&P 500, specifically for three months ending in September.
- Verizon, gaining 2.4% after reporting that profits spiked 45.5% for three months ending September compared to a similar period last year
- Energy companies’ shares gained this month due to a rally in oil prices, as well as the arrangement where the debt ceiling is raised temporarily
- Companies that will benefit from the $1 trillion infrastructure bill expected to be passed following a compromise from Democrats
- United Rentals and Vulcan Materials, dealers of construction materials and equipment, had their shares jump to more than 3%