S&P 500 moves to break five-day losing streak as investors monitor Fed Chairman Jerome Powell’s testimony
The S&P 500 broke a five-day losing streak at 4713.07, up 42.78 points, or 0.9%. The Nasdaq Composite rose 210.62 points, or 1.4%, to 15153.45 on Monday’s afternoon turnaround. The Dow Jones Industrial Average rose 183.15 points, or 0.5%, to 36252.02, its first gain in five days.
During the hearing, Mr. Powell said the central bank plans to move as aggressively as necessary to quell inflation. “If we have to raise interest rates further over time, we will,” he told lawmakers.
The bank has not taken any decision on shrinking its balance sheet, adding that “it is a long road to normalcy” for monetary policy.
The stock has been volatile as the prospect of an imminent and faster-than-expected interest rate hike has confused financial markets this month. Mr Powell on Tuesday played down the central bank’s role in containing inflation, while reiterating that interest rates are likely to remain at historically low levels.
He said he expects this year to ease supply-chain bottlenecks and help contain inflation. Analysts said the comments gave investors their clearest signal so far as to how the Fed plans to begin normalizing monetary policy in the coming months, while also noting whether the central bank will aggressively raise rates. calms the worries.
For some investors, the comments indicated a buying opportunity for stocks that had been beaten in recent sessions.
“We view the recent equity volatility as an adjustment to the Fed’s incrementally more aggressive stance, rather than as a sign that the Fed is about to end the recovery and equity rally abruptly,” said Mark Heifel, chief investment officer of the US. global wealth management at UBS Group, in a note to clients on Tuesday.
He added that stocks historically perform well in the months leading up to the first rate hikes of a cycle. Since 1983, Mr. Haefel said, the S&P 500 has grown an average of 5.3% in the three months before the first Fed rate hike, followed by an average of 5.3% over the next six months.
Still, some investors were nervous as the rate hike is likely to coincide with a slowdown in economic growth. “The risk now is high that rate hikes are going to coincide with falling growth, and that’s clearly a bad combination,” said Altaf Kasam, head of investment strategy for State Street Global Advisors in Europe.
Investors saw declines in tech and other growth stocks during the hearing. Both the technical and communications services sectors of the S&P 500 were up at least 1% after trading in the red earlier in the session. Consumer discretionary shares rose 0.4%.
Amazon.com rose $77.52, or 2.4%, to $3,307.24. Facebook parent meta platforms and Apple added more than 1.5%.
Energy stocks rose 3.4%, with Brent crude prices reaching their highest settlement price since early November.
Other stocks making big personal moves include Illumina.,
Which added $61.52, or 17%, to $423.80 after posting earnings late Monday, beating analysts’ expectations. Shares of Rivian Automotive added $2.11, or 2.6%, to $83.55, offsetting some decline of more than 5% on Monday, when the Wall Street Journal reported that the electric-truck maker’s chief operating officer had left.
The rally in government bond yields halted a day after the 10-year Treasury yield settled at a 52-week high. The yield on the benchmark bond fell to 1.745% on Tuesday from 1.779% on Monday, its biggest one-day drop since mid-December.
Investors are also gearing up for the start of the earnings season this week. The report will be especially important for technology firms that need strong growth to justify their valuation, Mr. Kasam said.
He said results would need to be consolidated more broadly to support US stocks, which are looking less attractive than their European counterparts.
“For America to maintain its top position in the world, it needs strong earnings,” he said.
With BlackRock, financial firms will dominate, report later in the week,
JPMorgan Chase and Wells Fargo are set to report on Friday.
Overseas, the Stockx Europe 600 rose 0.8% on gains for its tech sector. Stock markets in Asia remained mostly lower. Japan’s Nikkei 225 fell 0.9%, while Hong Kong’s Hang Seng index remained flat. In mainland China, the Shanghai Composite Index dropped 0.7%.