By Caitlin Ostroff and Gunjan Banerji
A dayslong selloff in the stock market intensified and Treasury
yields jumped Thursday as the latest comments from Federal Reserve
Chairman Jerome Powell did little to assuage fears about the recent
rise in yields.
At The Wall Street Journal Jobs Summit, Mr. Powell emphasized
the economy is far from reaching full employment. He stopped short
of indicating that the Fed would buy more long-term Treasurys each
month as an effort to contain yields, which some investors thought
was possible. Stocks turned lower after his comments, with losses
accelerating in the afternoon.
The S&P 500 declined 51.25 points, or 1.3%, to 3768.47, the
third consecutive session of declines. The Nasdaq Composite fell
274.28 points, or 2.1%, to 12723.47 and teetered on the edge of a
correction -- a drop of 10% from its recent high. The tech-heavy
gauge recorded its biggest three-day percentage decline since
September and has now given up its gains for the year. The Dow
Jones Industrial Average lost 345.95 points, or 1.1%, to
The declines were particularly steep among tech darlings and
favorites of momentum investors. Tesla fell $31.76, or 4.9%, to
$621.44, while ARK Innovation ETF dropped $6.68, or 5.3%, to
$118.43. The losses were broad, with nine out of 11 of the S&P
500's sectors falling.
"The uncertain market got an uncertain message," said Michael
Farr, president of Farr, Miller & Washington. "It was a
reiteration of a wait-and-see approach," he said of Mr. Powell's
The S&P 500's energy sector was a bright spot, gaining 2.5%.
Oil prices rose as OPEC and a Russia-led coalition of oil producers
kept most of their production cuts in place.
Meanwhile, the yield on the 10-year U.S. Treasury note jumped to
1.547%, the highest close since Feb. 19, 2020, before the pandemic
tipped the U.S. economy into a recession. That level marks a steep
climb from early January, when it was as low as 0.915%. Yields rise
when bond prices fall.
Thursday marked the latest concurrent move for stocks and bonds.
A selloff in U.S. sovereign debt has lifted Treasury yields,
curbing investors' appetite for the technology stocks that had
soared in a low-yield environment. Some investors have also
questioned whether the so-called TINA trade, or the feeling that
There is No Alternative to stocks, will end as Treasury yields
jump, dealing a blow to a tactic that had propelled stocks higher
for much of last year.
"There's a general feeling that interest rates are likely to go
higher," said Chris Zaccarelli, chief investment officer at
Independent Advisor Alliance. That's "particularly bad for the
types of stocks that led the market higher for the past year."
Central bank officials have previously said they would keep
monetary policy loose until the economy is stronger, and that they
view the rise in bond yields as a signal that investors are
optimistic about the U.S. economic recovery.
Some money managers are betting that additional fiscal stimulus
in the U.S. will boost inflation and cause the Fed to raise
interest rates sooner than they had expected. That has led to a
jump in real yields, or the returns on bonds after adjusting for
A key measure of investors' inflation expectations also surged
recently. Five-year breakevens -- which reflect the expected pace
of price increases over the five-year period that begins five years
from now -- climbed above 2.5% for the first time in 13 years
before closing at 2.487% Wednesday, according to Deutsche Bank.
Yields on Treasury inflation-protected securities, or TIPS,
which are a proxy for the real yields, have also shot upward.
Expectations for U.S. economic growth have been bolstered by a
proposed $1.9 trillion Covid-19 relief package. Senate Democrats
agreed Wednesday to narrow eligibility for some of the direct
payments that are part of the bill, a concession to centrists whose
support is needed to pass it.
Overseas, the pan-continental Stoxx Europe 600 fell 0.4%.
Most major Asian markets fell in a technology-led selloff that
mirrored Wednesday's trading in the U.S.
Markets were weighed down by uncertainty over the pace of global
economic recovery, as well as concerns that quickening inflation
could eventually lead to higher interest rates, according to Justin
Tang, the head of Asian research at United First Partners in
"On one hand, you want the economy to grow, but the massive cash
in the economy raises the boogeyman of inflation," he said. "I'm
not sure if the economy can actually take higher interest rates at
the moment. We are recovering, but I'm pretty sure we're not out of
the woods yet," he added.
Mr. Tang said the recent pullback was reminiscent of 2018, when
the tech sector sold off as bond yields rose, though he noted that
episode quickly eased.
--Joanne Chiu contributed to this article.
Write to Caitlin Ostroff at firstname.lastname@example.org and Gunjan
Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
March 04, 2021 17:02 ET (22:02 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.