S&P 500 Slips After Logging Best Day Since June
By Anna Hirtenstein and Caitlin McCabe
U.S. stocks fell Tuesday, halting Monday's blockbuster rally as
investors continued to grapple with volatility in both shares and
The S&P 500 dropped 0.5% in recent trading, pulling back
after it surged 2.4% Monday to log its best day since June. The Dow
Jones Industrial Average lost about 60 points, or 0.2%.
Meanwhile, last week's selloff of technology stocks continued,
with the Nasdaq Composite losing 0.8%.
Investors say their focus is squarely on central bank officials
for cues on how monetary policy may shift down the road. That will
determine their appetite for government bonds and for
inflation-adjusted returns. A flood of easy money by the Federal
Reserve since the pandemic hit last spring has helped subdue
returns on bonds and fueled a rally in stock markets for much of
the past year.
This phenomenon seemed to halt in recent weeks: money managers
adjusted their portfolios in anticipation of an economic rebound
and a potential increase in inflation, prompting a selloff in
government bonds. Yields jumped last week as bond prices fell,
leading to jitters in stocks. Bond markets have since stabilized,
and stocks surged higher Monday.
"We're just taking a breather after yesterday," said Fahad
Kamal, chief investment officer at Kleinwort Hambros.
"The state of the bond market is driving everything," he added.
"The central banks continue to be the real pivot in markets right
now: as long as they continue to buy enormous amounts of bonds in
the market, the upside move [in yields] is capped."
The yield on the 10-year U.S. Treasury bonds ticked down to
1.427%, from 1.444% on Monday. Still, that is sharply higher from
this year's closing low on Jan. 4 of 0.915%.
The recent volatility in markets "shows how hostage we are to
policy remaining exactly where it is," said Georgina Taylor, a
multiasset fund manager at Invesco. "There is no real room for
policy tightening to take hold: we still need that to be supportive
of the economic recovery."
Investors will be assessing comments by Federal Reserve Gov.
Lael Brainard at an event starting at 1 p.m. ET for fresh cues on
how the central bank views the moves in bond markets and prospects
for higher inflation. On Monday, she didn't address the issues when
she spoke at another event.
Fed officials have so far suggested the climb in yields reflects
expectations for an economic recovery. And Fed Chairman Jerome
Powell told members of Congress last week that the central bank
will continue to maintain low interest rates and continue asset
purchases until more progress has been made on its employment and
"We think that the coming days and weeks will likely be
pivotal," and could see central banks taking steps beyond their
verbal interventions, said Peter Schaffrik, a global macro
strategist at RBC Capital Markets.
Shares of technology companies were among those that fell. Apple
lost 1.3%, Twitter fell 1.7% and Microsoft slid 1.2%.
Still, there were bright spots in the market: Zoom Video
Communications added 1.4% after it reported a surge in revenue and
said it expects continued rapid growth in 2021. Payments company
Square climbed 6% after it said its industrial bank has begun
And companies that tumbled sharply during last year's market
rout also surged. Cruise companies Carnival and Royal Caribbean
Group both added more than 4%. Investors and analysts expect shares
of companies such as cruise lines to rebound once larger swaths of
the population receive the Covid-19 vaccine.
"We're absolutely seeing a shift toward value" in stock markets,
Mr. Kamal said. "European equities are beneficiaries of this, a lot
of major companies are value linked."
Overseas, the pan-continental Stoxx Europe 600 added 0.4%.
In Asia, most major benchmarks finished the day down. China's
Shanghai Composite Index and Hong Kong's Hang Seng both fell 1.2%.
South Korea's Kospi Index rose 1%, buoyed by the prospect of a new
pandemic relief spending package.
Write to Anna Hirtenstein at firstname.lastname@example.org and
Caitlin McCabe at email@example.com
(END) Dow Jones Newswires
March 02, 2021 11:23 ET (16:23 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.