S&P 500 Slips After Logging Best Day Since June
By Anna Hirtenstein and Caitlin McCabe
U.S. stocks wobbled Tuesday, halting Monday's blockbuster rally
as investors continued to grapple with volatility in both shares
The S&P 500 lost 0.1% in recent trading, pulling back after
it surged 2.4% Monday to log its best day since June. The broad
benchmark index was weighed down, in part, by a continued decline
in technology stocks, which also sent the Nasdaq Composite tumbling
The Dow Jones Industrial Average, meanwhile, ticked up about 30
points, or 0.1%, after swinging between gains and losses throughout
the day. The blue-chip index lost more than 150 points in intraday
trading before reversing course.
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 fell to 1.421%,
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."
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 tumbled
Tuesday, continuing a trend that began last month. Technology
stocks in particular are sensitive to rising rates, in part because
they can crimp the value of future profits. Apple lost 1.4%,
Twitter fell 2.8% and Microsoft slid 0.8%.
Still, there were bright spots in the market: Payments company
Square climbed 5.7% 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 3% or more. Investors and analysts expect an
increase in consumer demand for travel services such as cruise
lines once larger swaths of the population receive the Covid-19
"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 0.2%.
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 13:54 ET (18:54 GMT)
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