US stocks seem to have recovered from the shock it had when the Federal Reserve announced possible rate hikes in 2022.
S&P 500 rose as much as 1.2% on Monday.
Apparently, purchases have resumed in energy, financial and industrial stocks, fueling the S&P 500. Meanwhile, tech stocks performed at their worst.
But some officials said the Fed's policy outlook should be more adapted to inflationary risks, so Dallas Fed President Robert Kaplan disclosed that he is in favor of cutting back bond purchases "sooner rather than later." This is supported by his colleague, St. Louis Fed President James Bullard.
However, Jeffrey Kleintop, chief strategist at Charles Schwab & Co, said the tightening of policy will be slower than the hasty easing the Fed did at the start of the COVID-19 pandemic, because only by that will economically sensitive stocks perform well.
Meanwhile, former Treasury Secretary Lawrence Summers and billionaire investor Ray Dalio said the US is heading for a period of overheating and inflation, which could threaten economic recovery, even though the Fed said it will step in before such happens.
Other key events for this week are:
- Powell's testimony on the Fed's emergency lending programs (Tuesday);
- policy meeting of the Bank of England (Thursday).
