U.S. stocks traded lower on Thursday afternoon after shedding morning gains, as Wall Street assessed Federal Reserve Chair Jerome Powell's comments that the central bank moves strongly to bring inflation down.
U.S. stocks snapped a lengthy losing streak on Wednesday, with the Dow Jones Industrial Average rising 436 points, or 1.4%, to 31581, the S&P 500 advancing 72 points, or 1.83%, to 3980, and the Nasdaq Composite gaining 247 points, or 2.14%, to 11792. For the Nasdaq, the 7-day losing streak was its longest since 2016.
Stocks shook off early gains to trade lower on Thursday afternoon following hawkish news from the world's two largest central banks.
During a discussion hosted by the Cato Institute, Federal Reserve Chairman Jerome Powell said the Fed remained strongly committed to fighting inflation, and that it wouldn't be deterred by politics or other distractions.
"I can also assure you that we never take into consideration external political considerations," Powell said.
Meanwhile, the European Central Bank hiked interest rates by 75 basis points, and signaled that more jumbo-sized rate hikes would likely follow.
Gene Goldman, chief investment officer at Cetera Investment Management, said Powell's comments largely reiterated the hawkish tone from his Jackson Hole speech late last month.
"The comments from Powell are nothing groundbreaking. There was nothing really new. He continued to stress the importance of tightening policy to fight inflation," Goldman said.
He added that he expects markets will remain rangebound until investors get the next update on inflation in August, which is due out Tuesday.
Powell's comments followed similarly hawkish remarks from Fed Vice-Chair Lael Brainard, who said Wednesday that higher interest rates would be necessary "for some time," as well as a Wall Street Journal report hinting at another 75 basis point rate hike from the Fed at its meeting later this month. Elsewhere in North America, the Bank of Canada delivered another 75 basis-point rate hike on Wednesday.
Stocks also shrugged off Treasury yields and a stronger dollar as the 2-year yield rose 1.8 basis points to 3.489%, while the 10-year yield rose 1 basis point to 3.279%. The ICE U.S. Dollar Index rose 0.1%, reclaiming the 110 level.
Crude oil prices were also rising on Thursday after falling to their lowest levels since Russia invaded Ukraine one day earlier. West Texas Intermediate crude for October delivery was up $1.72, or 2.1%, to $83.62 a barrel.
BTIG's Jonathan Krinsky said the decline in stocks over the past three weeks had left them in "oversold" territory, meaning the main benchmarks were primed for a bounce.
"The market is short-term oversold but everyone knows it," Krinsky said in emailed comments.
Back in Europe, the euro rallied briefly after the ECB rate hike, before turning back lower as focus shifted back toward expectations for another 75 basis point hike from the Federal Reserve in September.
The pound also declined against the dollar following the ECB hike and U.K. Prime Minister Liz Truss unveiling details of a £150 billion ($173 billion) support package for households and business struggling with surging power prices.
On the U.S. economic data front, weekly jobless claims data showed layoffs in the U.S. remained near record lows as the number of Americans applying for unemployment benefits fell to its lowest level in three-and-a-half months.
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