U.S. Stocks Regain Ground After Early Sell-Off But Remain Mostly Lower

Stocks moved sharply lower in early trading on Tuesday but have regained ground over the course of the morning. The major averages have climbed well off their lows of the session, although the tech-heavy Nasdaq continues to post a steep loss.

The Dow fell more than 360 points early in the session but is currently down just 82.56 points or 0.3 percent at 31.439.13. The S&P 500 is down 16.35 points or 0.4 percent at 3,860.15, while the Nasdaq is underperforming its counterparts and is down 161.11 points or 1.2 percent at 13,371.93.

The early weakness on Wall Street reflected concerns about the outlook for inflation and the potential for higher interest rates due to the recent increase in bond yields.

The yields on ten-year notes and thirty-year bonds reached their highest intraday levels since the early days of the coronavirus pandemic earlier in the day.

However, selling pressure waned as traders reacted to Federal Reserve Chair Jerome Powell’s prepared remarks before the Senate Banking Committee.

Powell reiterated interest rates will remain at near-zero levels and the Fed will continue its asset purchases at the current rate until “substantial further progress” has been made toward its goals of maximum employment and price stability.

“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said.

With regard to inflation, Powell acknowledged that consumer prices have partially rebounded following the steep drop last spring but noted prices for sectors that have been most adversely affected by the pandemic remain “particularly soft.”

The Fed chief said annual inflation remains below the central bank’s 2 percent target and reiterated monetary policy is likely to remain unchanged until inflation is on track to moderately exceed 2 percent for “some time.”

On the U.S. economic front, the Conference Board released a report showing consumer confidence has improved more than expected in the month of February.

The Conference Board said its consumer confidence index rose to 91.3 in February from a downwardly revised 88.9 in January.

Economists had expected the consumer confidence index to inch up to 90.0 from the 89.3 originally reported for the previous month.

Despite the recovery attempt by the broader markets, substantial weakness remains visible among networking stocks. The NYSE Arca Networking Index has climbed well off its worst levels of the day but is still down by 2.4 percent.

Gold stocks are also seeing substantial weakness after moving sharply higher in the previous session, with the NYSE Arca Gold Bugs Index tumbling by 2.4 percent. The pullback comes as the price of gold is nearly flat after skyrocketing by more than $30 an ounce on Monday.

Semiconductor, computer hardware and biotechnology stocks have also shown notable moves to the downside, weighing on the tech-heavy Nasdaq.

On the other hand, airline stocks are extending the rally seen over the two previous sessions, driving the NYSE Arca Airline Index up by 1.6 percent.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday, with the Japanese markets closed for a holiday. China’s Shanghai Composite Index edged down by 0.2 percent, while Australia’s S&P/ASX 200 Index advanced by 0.9 percent.

The major European markets have also turned mixed on the day. While the German DAX Index is down by 0.7 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries have seen considerable volatility over the course of the session. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.365 percent.

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