Stocks turned slightly positive Thursday afternoon, with the three major indexes reversing earlier losses.
The Dow and S&P 500 each pushed into slightly positive territory after dropping earlier in the session. The Nasdaq traded a tick above the flat line after shedding 2% on Wednesday amid another day of selling for technology shares. U.S. crude oil prices gave back some gains after spiking 5% on Wednesday, though a massive container blocking passage in the Suez Canal continued to plug the significant trade artery for another day, weighing on oil supplies.
The earlier move lower in equities came following remarks from Federal Reserve Chair Jerome Powell, who spoke on NPR’s Morning Edition Thursday morning. Powell doubled down in his assertion that the Fed remained strongly committed to targeting 2% average inflation over time, and said that any eventual pullback in Fed support would be done “gradually over time, and with great transparency.”
However, some investors have been skeptical that the Fed will resist adjusting its monetary policy positioning in the face of higher inflation this year. Though Powell and other Federal Open Market Committee members have advocated a “patient” stance that favors leaving accommodative policies in place during the recovery, the specter of much greater-than-expected inflation this year remains on the table.
“This will be the first time that every country in the world is emerging from recession simultaneously. And the Fed and other policymakers are banking on this idea that it’ll be a relatively short strain on supply chains but eventually, things get up and running again and you can get the input components to where they’re most needed,” Tim Quinlan, Wells Fargo senior economist, told Yahoo Finance. “But I think one of the under-appreciated risks is the scope for this to create more of an inflation shock in the short-run than they’re banking on right now.”
The benchmark 10-year yield briefly fell back below 1.6%, bringing it more than 15 basis points lower from last week’s high. Still, yields remain sharply higher for the year-to-date, as concerns over rising inflation linger for many investors.
“We think long-term bond yields are just in a pit stop here in what’s going to be a multi-year move higher,” JPMorgan global market strategist Gabriela Santos told Yahoo Finance.
“Ultimately, we do continue to think that it will harm the more speculative or expensive parts of the market like tech and really benefit the more cyclical [sectors] and especially the parts of the market that can benefit from a steepening yield curve,” she added.
With just a week left of the first quarter of 2021, the stocks that had been the most badly beaten down last year have so far largely outperformed. Cyclical sectors like financials, industrials and energy gained as prospects of rising interest…
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