Stocks Open Lower Ahead of Powell's Comments
By Joe Wallace
A retreat in technology stocks continued Tuesday as U.S. stocks
slid and investors awaited Federal Reserve Chairman Jerome Powell's
testimony in Congress on the health of the economy.
The S&P 500 ticked down 0.5%. The benchmark stocks gauge on
Monday fell for a fifth consecutive day, its longest losing streak
since last February. The Nasdaq Composite Index dropped 2% as
technology stocks continued to lead the market lower. The Dow Jones
Industrial Average retreated 49 points, or 0.2%.
A sharp rise in yields on U.S. government bonds in recent days
has sapped investors' appetite for riskier assets, including
stocks. Shares in technology companies, which have powered the
broader market higher for much of the past year, are seen as
particularly vulnerable. That is because many tech companies'
valuations are tied to their future earnings potential. Those
profits are less valuable in today's terms when investors apply a
higher discount rate.
The rise in bond yields "naturally does cause investors and
cause markets to re-examine the view on equities," said Paul
Jackson, global head of asset allocation research at Invesco.
Investing in government bonds is beginning to look more attractive
for the first time in months, he said.
But "the level at which bond yields become truly problematic for
equities is a long way from where we are now," Mr. Jackson
The yield on 10-year Treasury notes ticked down to 1.362%, from
1.370% Monday. Yields, which rise as bond prices fall, are lower
than they were before the coronavirus pandemic sent markets into a
tailspin last year. Investors say it is the speed at which yields
have increased, rather than their level, that is hurting
The move has sharpened focus on Chairman Powell's semiannual
report on the economy and monetary policy to Congress. The first of
two days of testimony starts with Mr. Powell's appearance before a
Senate Committee at 10 a.m. ET.
Mr. Powell is again likely to signal that easy-money policies
will remain in place for the foreseeable future. He will probably
face questions on the size of the next fiscal stimulus package,
interest rates and bond purchases, and the potential for inflation
to heat up alongside accelerating economic growth.
European Central Bank President Christine Lagarde on Monday said
the ECB was closely monitoring bond yields, comments interpreted by
analysts as a sign of discomfort with their recent rise. Mr. Powell
is unlikely to follow suit by pushing back on the rise in Treasury
yields, according to Remi Olu-Pitan, multiasset fund manager at
"At the moment, none of those indicators are flashing red --
they are not even amber yet -- but they are not as green as they
were six months ago," she said, referring to the level of yields
and expectations of when the Fed is likely to raise interest
Tesla fell almost 5% ahead of the market open, after declining
almost 9% on Monday. The move came as the price of bitcoin slid
about 8% to $48,740.44, according to CoinDesk.
The latest bout of volatility in cryptocurrency markets followed
comments by Tesla Chief Executive Elon Musk, who said over the
weekend that prices for bitcoin and ethereum seemed high. The
electric-vehicle maker earlier this month disclosed that it had
bought $1.5 billion in bitcoin. Mr. Musk has also become a
prominent cheerleader for cryptocurrencies.
Shares of technology firms and other stocks that have performed
well during the pandemic came under pressure ahead of the opening
bell. Palantir Technologies extended its recent slide, losing more
than 5% in premarket trading.
Payments firm Square fell roughly 5%. It is due to report
earnings after markets close, along with security-software company
Home Depot said growth could slow this year, knocking shares by
2.3% in premarket trading.
Overseas, the Stoxx Europe 600 shed 0.8%, led lower by tech
stocks. HSBC shares fell 2% after the bank said it would invest an
extra $6 billion in Asia in the next five years and could sell its
U.S. retail operations.
In Asia, Hong Kong's Hang Seng climbed 1% and China's Shanghai
Composite Index slipped 0.2% by the close of trading.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
February 23, 2021 09:46 ET (14:46 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.