Dow Jones falls over 400 points from the highs after Fed Chair Powell says valuations are high

US benchmark indices on Wall Street fell from record levels on a bout of profit booking and after Federal Reserve Chair Jerome Powell questioned the valuations of risk assets.

The Dow Jones ended 90 points lower but that’s after a 400-point fall from the day’s high. The S&P 500 and Nasdaq underperformed, falling between 0.5% to 1% led by investors taking some profits in recent outperformers Nvidia and Oracle.

During an address on Tuesday, Fed Chair Powell was questioned about the rising prices of assets and the current financial conditions.

“We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we’re trying to achieve,” Powell said. “But you’re right, by many measures, for example, equity prices are fairly highly valued.”

Powell’s remarks triggered a fall from the sessions’ highs for the Dow. However, the Fed Chair was quick to add that it is not the Fed’s mandate to determine what the right stock prices or valuations should be.

Chatter over a divided Federal Reserve ahead of the October 29 policy meeting are also beginning to gain ground. While Powell did not offer any hints as to whether he will support a rate cut at the next policy, he did mention that risks to inflation and labor market remain and that policymakers face a difficult road ahead.

On the flip side, Fed Governor Michelle Bowman said that the FOMC needs to act proactively and decisively in cutting rates as their is a danger of falling behind the curve based on the current labor market conditions. Atlanta Fed Chief Raphael Bostic cautioned of more inflation ahead, stating that while he was comfortable with last week’s cut, he cannot commit to more easing based on the current inflation scenario.

Gold prices made new records on Monday but saw some profit taking at elevated levels. The Yellow Metal has now rallied close to 50% so far this year, but has been outperformed by its peers Silver and Platinum.