Dow slips ahead of testimony from Yellen and Powell

U.S. stocks traded mostly lower Tuesday ahead of the first of two days of testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on the state of the government’s efforts to limit the economic damage from the COVID-19 pandemic.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average

    fell 83.38 points, or 0.3%, to 32,647.82.
  • The S&P 500

    was off 7.19 points, or 0.2%, at 3,933.40.
  • The Nasdaq Composite

    gave up 19.30 points, or 0.1%, to trade at 13,358.24.

On Monday, the Dow rose 103.23 points, or 0.3%, to close at 32,731.20, the S&P 500 added 27.49 points, or 0.7%, to close at 3,940.59, with both benchmarks halting a two-session skid. The Nasdaq Composite advanced 162.31 points to finish at 13,377.54, a gain of 1.2%.

What’s driving the market?

Stocks looked set to relinquish some of Monday’s gains as investors brace for testimony from Powell and Yellen starting at 12 p.m. Eastern Time in front of the House Financial Services Committee, with the hopes of gleaning more insights about how regulators will respond to a rapid economic recovery and its potential to ignite long-dormant inflation.

In prepared remarks released on Monday, Powell said that the U.S. economy has recovered more quickly than generally expected “and looks to be strengthening,” but cautioned that the comeback is far from complete.

‘Today, the overall market appetite will depend on the outcome of the testimony of Fed Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen,” wrote Charalambos Pissouros, senior market analyst at JFP Group.

Powell has tried to communicate a stance that underscores the central bank’s desire to keep benchmark interest rates down while the labor market recovers from the impact of lockdown measures implemented to limit the spread of the coronavirus but some critics fear that policy makers may lose control of that narrative.

“The released statement last night reinforced the Fed’s optimism about the glide path of the current economic rebound, but also reiterated that the recovery was in the foothills, and support was set to remain for the foreseeable future,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Tuesday also marks the anniversary of the pandemic lows on March 23, 2020, when all of the major stock benchmarks put in their bear-market lows as the coronavirus pandemic plunged the U.S. into recession before staging a powerful rebound, aided at least partly by a cocktail of fiscal spending, monetary-policy intervention, and a trove of retail traders stuck working from home speculating on an eventual stock-market recovery.

Thus far, the rollout of vaccines has helped to mitigate some of the effects of the pandemic but economic recovery has come in fits and starts, with Europe showing signs of another burst of infections.

Indeed, rising COVID-19 cases in Europe have fueled recent lockdown extensions in Germany, France and Italy.

The global tally for the coronavirus-borne illness rose above 123.7 million on Tuesday, according to data aggregated by Johns Hopkins University, with the U.S. accounting for 24% of cases at 29.8 million. The U.S. is administering about 2.5 million Covid vaccine shots every day. However, the number of new cases is increasing in 21 states as highly infectious variants spread and governors relax restrictions on businesses.

On the vaccine front, federal health officials said early Tuesday that results of a U.S. trial of AstraZeneca’s COVID-19 vaccine may have included “outdated information,” providing an “incomplete view of the efficacy data.

Looking ahead, investors will also be watching for comments from other Fed members including St. Louis Fed President Jim Bullard, who will speak at the London School of Economics at 9 a.m., Richmond Fed President Tom Barkin will speak at 11 a.m., while Fed Gov. Lael Brainard, New York Fed President John Williams and Bullard will speak later in the afternoon.

In economic reports, data on new home sales for February are due at 10 a.m., while a report on manufacturing conditions in the Richmond, Va. area is due at the same time.

Which stocks are in focus?
  • GameStop

    on Tuesday after the close is expected to report earnings per share of $1.35, or $88 million, on $2.211 billion in revenue for the fourth quarter, according to the consensus estimates of six analysts surveyed by FactSet. Shares were up 1%.
  • Microsoft Corp.

    is in discussions to purchase videogame-focused chat platform Discord for more than $10 billion, according to a report by Bloomberg News. Microsoft shares rose 0.7%.
How are other markets trading?
  • The yield on the 10-year U.S. Treasury note

    fell 3.7 basis points to 1.652%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index
    a measure of the currency against a basket of six major rivals, was up 0.4%.
  • Oil futures fell sharply as rising COVID-19 cases prompted extended lockdowns in Europe, with the U.S. benchmark

    down 4.1% at $59.02 a barrel on the New York Mercantile Exchange.
  • Gold futures edged lower, with the April contract

    down 0.3% at $1,732.90 an ounce.
  • In Europe, the Stoxx 600 index

    was off 0.1%, while London’s FTSE 100

    was down 0.2%.
  • In Asia, the Shanghai Composite

    fell 0.9%, Hong Kong’s Hang Seng Index

    tumbled 1.3% and Japan’s Nikkei 225

    dropped 0.6%.

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