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US Stocks Drop After Powell Remarks 03/04 13:03
Stocks turned lower on Wall Street Thursday as bond yields made another
upward spike, renewing pressure on high-flying technology stocks.
NEW YORK (AP) -- Stocks turned lower on Wall Street Thursday as bond yields
made another upward spike, renewing pressure on high-flying technology stocks.
The S&P 500 was down 1.3% in early afternoon trading Thursday, giving up an
early gain, and the tech-heavy Nasdaq pulled back 2.1%. The Dow Jones
Industrial Average fell 311 points, or 1%, to 30,972. Small-company stocks fell
even more.
The losses came as the yield on the 10-year Treasury rose sharply during a
question-and-answer session with Federal Reserve Chair Jerome Powell during
which Powell said inflation will likely pick up in the coming months but the
increase will be temporary, and won't be enough for the Fed to alter its
low-interest rate policies.
As the economy reopens this spring and summer, and vaccines are distributed
and the coronavirus retreats, many economists expect a spending boom that will
stretch available supplies of goods and services. That will likely push up
prices, Powell said.
Price drops that occurred about a year ago when the pandemic began will drop
out of the year-over-year calculations soon, which could also temporarily lift
inflation.
Powell also gave no hint that the Fed would take steps to keep longer-term
interest rates in check, such as by shifting some of its $80 billion in monthly
Treasury purchases to longer-term securities.
"We think our current policy stance is appropriate," he said.
The yield on the 10-year Treasury note jumped to 1.54% during Powell's
remarks, from 1.47% just before, a significant move. At the beginning of the
year the yield was trading at 0.93%.
Investors have been keeping a close eye on the bond market in recent weeks,
where yields have been rising along with expectations that the economy, and
possibly inflation, could be set to pick up as vaccinations increase and
coronavirus restrictions on businesses, travel and schooling begin to lift more.
When yields rise quickly, as they have in recent weeks, it forces Wall
Street to rethink the value of stocks. Technology stocks are most vulnerable to
this reassessment after having soared during the pandemic, making them look
pricier than the rest of the market.
"You're having a fairly healthy and natural consolidation period," said Mark
Hackett, chief of investment research at Nationwide.
Wall Street has been anticipating an improving economy since late last year
from the eventual distribution of vaccines, additional stimulus and a steadier
reopening, he said.
"The market tends to do better when the good news is further out and
struggle more when it is in hand," he said. "There's really nothing currently
as the next catalyst."
Crude oil prices jumped 5% after OPEC members agreed to leave most of their
existing oil production cuts in place. That helped send energy company stocks
broadly higher. Exxon Mobil rose 3.5% and ConocoPhillips rose 3.1%.
The Senate is moving forward with President Joe Biden's stimulus bill, with
most of the negotiations now happening between the more moderate Democrats in
the Senate and the White House.
Investors are also looking ahead to the February jobs report on Friday.
Economists surveyed by FactSet expect employers created 225,000 jobs last
month. The report also includes numbers for how much wages are rising across
the economy, a key component of inflation.
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