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By Nicholas
Jasinski | Tuesday, February 23 Bouncing
Back. Today began how yesterday ended, with
a pullback in stocks of buzzy software companies and electric-vehicle
start-ups, Bitcoin,
and other growth-oriented and recently
hot areas of the market—which weighed on major indexes. But an
afternoon rally following remarks from Federal
Reserve Chairman Jerome
Powell stemmed the bleeding, and
indexes ended the day roughly where they started it. Angst about
rising bond yields was again the most cited reason for the tech-stock
declines this morning. But during the first of two days of congressional
testimony today, Powell tamped down concerns that the central bank would be
tightening monetary policy any time soon, as the bond market has been
signaling. The Fed
chairman largely reiterated his frequently dovish remarks of
late, emphasizing that the recovery has a “long way to
go.” Essentially, his message was that the central bank won’t be taking
its foot off the stimulus gas pedal until unemployment falls significantly
and inflation looks to remain above its 2% target for an extended period. Powell
didn't come across as concerned about the recent sharp rise in Treasury
yields, or if that could cause rising borrowing costs to damp the pace of the
recovery. Read more from Barron's Alexandra
Scaggs here. The yield on
the 10-year U.S. Treasury note declined slightly today, to around 1.36%—but
is up from 1.1% less than two weeks ago. Higher rates erode the present value
of future cash flows—especially for growth companies like technology firms,
which expect a large chunk of their profits to come further out into the
future than more mature businesses. Powell's
soothing words pushed stocks, and especially growth areas of the market,
well off their worst levels of the morning. The Dow
Jones Industrial Average closed at its
second-highest level ever, up less than 0.1% after having been down
1.2% shortly after the opening bell. The S&P
500 reversed a 1.8% loss to rise 0.1%,
completing its largest intraday turnaround since June. The Nasdaq
Composite bounced back from a
3.9% loss to slip just 0.5% after losing 2.5% on Monday. Growth
stocks were still the day's laggards, but only just. The S&P 500
technology sector closed down 0.3%, while consumer discretionary lost 0.7%.
Both had been down around 4% in the morning. Cyclical and
more value-oriented sectors were better off, with S&P 500 energy stocks
closing up 1.7% and financials gaining 0.6%, while defensives held their
ground: Utilities rose 0.8% and consumer staples added 0.1%. |
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DJIA: +0.05% to 31,537.35 The Hot
Stock: Marathon Oil +9.4% Best Sector:
Energy +1.7% |
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