(Feb 24): U.S. stocks reversed losses after reassuring comments from Federal Reserve Chairman Jerome Powell on inflation and the outlook for growth spurred traders to buy the dip. Treasuries edged higher and Asian equities look set for a mixed start.
The S&P 500 Index erased a drop to end Tuesday higher, though declines among technology shares left the Nasdaq 100 lower. Powell signaled the Fed was nowhere close to pulling back on its support for the economy. Airlines, lodging companies and cyclical shares set to benefit from the end of pandemic lockdowns outperformed. Japanese traders return after a holiday, while futures dipped in Hong Kong and Australia.
Treasuries were volatile, with 10-year yields initially rising before fading to hover around 1.36%. Bets on faster growth pushed the 5- and 30-year yield curve to the highest in more than six years. The dollar was narrowly mixed against its major peers.
As Powell reassured investors on stimulus, he voiced expectations for a return to more normal, improved activity later this year and said that higher bond yields reflected economic optimism, not inflation fears. That helped fuel a return of the buy-the-dip mentality that has limited equity drawdowns in recent months, with investors betting on a global economic recovery spurred by vaccines and U.S. spending.
“There was something in there for everyone today,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, said in a Bloomberg TV interview. “Powell did recognize medium-term improvement in the economy but I think laid to rest some percolating inflation fears.”
Elsewhere, Bitcoin tumbled below US$50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s rally. Oil dipped in New York as technical indicators signaled prices are due for a pullback following a strong rally this month.
Some key events to watch this week:
EIA crude oil inventory report is out Wednesday.
Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.
These are some of the main moves in markets:
The S&P 500 Index rose 0.1% on Tuesday.
Hang Seng futures lost 0.4%.
Futures on Australia’s S&P/ASX 200 Index fell 0.4%.
The Bloomberg Dollar Spot Index fell 0.1%.
The euro bought US$1.2146.
The yen was at 105.29 per dollar.
The offshore yuan was at 6.4597 per dollar.
The yield on 10-year Treasuries was little changed at about 1.35%.
West Texas Intermediate crude rose 0.3% to US$61.90 a barrel.
Gold fell 0.2% to US$1,805.08 an ounce.