By Will Horner and Paul Vigna
U.S. stocks turned higher Wednesday after Federal Reserve
Chairman Jerome Powell signaled that the bank isn't about to alter
its monetary policy, helping push the Dow Jones Industrial Average
to a record.
The blue-chip index rose 424.51 points, or 1.3%, to 31961.86,
its 10th closing high this year. Earlier in the session, the index
crossed 32000 for the first time.
The S&P 500 rose 44.06 points, or 1.1%, to 3925.43. The
Nasdaq Composite added 132.77 points, or 1%, to 13597.97, and the
Russell 2000 small-cap index jumped 53.07 points, or 2.4%, to
For the second straight day, major stock indexes opened in the
red before reversing course, as investors have been reassured by
Mr. Powell's testimony. The S&P 500 snapped a five-session
losing streak Tuesday.
Speaking to the Senate Banking Committee, Mr. Powell reaffirmed
his commitment to keeping easy-monetary policies unchanged for the
foreseeable future and was generally dismissive of any inflation
concerns. That eased investor concerns about rising interest rates
and fears that an overheating economy would alter the Fed's
"There was relief in the market that yields and inflation aren't
going to be as runaway as anticipated," said Shawn Snyder, head of
investment strategy at Citi U.S. Wealth Management.
Stock markets have wavered in recent days following a strong
start to the year, with highflying tech companies leading declines.
The Nasdaq had doubled from its lows last March, with companies
like Tesla rising even further.
It isn't at all surprising that investors chose now to lock in
some of those profits, said LPL Financial strategist Jeff
Buchbinder. "We've seen this in other bull markets coming off major
bear-market lows. It makes total sense to take a breather."
Investors said a rise in government bond yields, driven by
improving growth prospects and rising inflation expectations, has
accelerated a rotation out of the tech stocks that led markets
higher during the pandemic, and into the stocks best placed to
benefit from an end to lockdowns.
"This really is a function of economies reopening," said Brian
O'Reilly, head of market strategy at Mediolanum Investment Funds.
"Bond yields are rising because of good vaccination rates in the
U.S. and U.K. and it's prompting a simple rotation away from
everything that did well last year, the stay-at-home stocks, to the
ones that didn't, the go-outside stocks."
"It's a good story in some ways, in that the market is trying to
price in that economies are going to reopen," he added.
The yield on the benchmark 10-year Treasury note, which moves
inversely to its price, rose to 1.43% early in the session and
settled at 1.388%, a 52-week high. That was up from 1.363%
Though tech is usually viewed as one monolithic sector, the
companies within it have been subject to the same growth/value
debate as the rest of the market, said Michael Greenly, a senior
portfolio manager at UBS Private Wealth Management.
While the big tech names have fallen, more cyclically focused
companies, like semiconductors, have been doing well, he said. The
PHLX Semiconductor Index, for instance, is up nearly 14% so far
this year, outpacing the Nasdaq Composite's 5.5% gain.
"You're seeing a change in leadership in tech," he said.
While the Fed has stuck to the same message since the pandemic
hit, the strength of the recovery could prompt it to change course
sooner than many investors have been expecting, said Paul O'Connor,
head of multiasset management at Janus Henderson Investors.
"Markets are expecting that to be a 2022 story, however we are
seeing sizable upgrades to U.S. GDP. Somewhere in the middle of
this year the discussion around tapering is going to have to take
place," he said.
On the economic front, new homes sales rose 19% annualized in
January, faster than expected. One concern, though, is that rising
lumber prices could force home prices higher, offsetting low
Bitcoin rose 1% to $48,526 after falling 13% Tuesday. Other
cryptocurrencies that declined Tuesday, such as ether, also
Overseas, the pan-continental Stoxx Europe 600 index rose 0.5%.
Asia-Pacific indexes slipped. The biggest losses were in Hong Kong,
where the city's government moved to capitalize on booming markets
by increasing a levy on share trading. Hong Kong's benchmark Hang
Seng Index dropped 3%.
Xie Yu and Caitlin Ostroff contributed to this article.
Write to Will Horner at William.Horner@wsj.com and Paul Vigna at
(END) Dow Jones Newswires
February 24, 2021 17:23 ET (22:23 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.