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Market Snapshot: Dow modestly lower as Yellen, Powell testify before lawmakers

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U.S. stocks were mostly lower in choppy trade Tuesday as the first of two days of testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen got under way on the state of the government’s efforts to limit the economic damage from the COVID-19 pandemic.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average
    DJIA,
    -0.06%

    fell 36.13 points, or 0.1%, to 32,695.07.
  • The S&P 500
    SPX,
    +0.16%

    was up 3.19 points, or 0.1%, at 3,943.78.
  • The Nasdaq Composite
    COMP,
    +0.06%

    gave up 22.02 points, or 0.2%, to trade at 13,355.52.

On Monday, the Dow rose 103.23 points, or 0.3%, to close at 32,731.20, the S&P 500 added 27.49 points, or 0.7%, to close at 3,940.59, with both benchmarks halting a two-session skid. The Nasdaq Composite advanced 162.31 points to finish at 13,377.54, a gain of 1.2%.

What’s driving the market?

Stocks were choppy as Yellen and Powell appeared before the House Financial Services Committee, with investors looking to glean insight about how regulators will respond to a rapid economic recovery and its potential to ignite long-dormant inflation.

Live blog: Powell, Yellen face House panel amid concerns over deficit, inflation

In prepared remarks released on Monday, Powell said that the U.S. economy has recovered more quickly than generally expected “and looks to be strengthening,” but cautioned that the comeback is far from complete.

‘Today, the overall market appetite will depend on the outcome of the testimony of Fed Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen,” wrote Charalambos Pissouros, senior market analyst at JFD Group.

Powell has tried to communicate a stance that underscores the central bank’s desire to keep benchmark interest rates low while the labor market recovers from the impact of lockdown measures implemented to combat the coronavirus pandemic but some critics fear that policy makers may lose control of that narrative.

“The released statement last night reinforced the Fed’s optimism about the glide path of the current economic rebound, but also reiterated that the recovery was in the foothills, and support was set to remain for the foreseeable future,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Tuesday also marks the anniversary of the pandemic lows on March 23, 2020, when all of the major U.S. stock benchmarks put in their bear-market lows, as the coronavirus pandemic plunged the U.S. into recession, before staging a powerful rebound, aided at least partly by a cocktail of fiscal spending and monetary-policy intervention.

Thus far, the rollout of vaccines has helped to mitigate some of the effects of the pandemic but economic recovery has come in fits and starts, with Europe showing signs of another burst of infections.

Indeed, rising COVID-19 cases in Europe have fueled recent lockdown extensions in Germany, France and Italy. Oil futures tumbled sharply as a result, weighing on the energy sector, which fell 0.8%, on fears for reduced summer travel and energy demand.

On the vaccine front, federal official said early Tuesday that the results of a U.S. trial of AstraZeneca’s COVID-19 vaccine may have included “outdated information,” providing an “incomplete view of the efficacy data.

Meanwhile, expectations the Biden administration will press for another round of heavy spending centered on infrastructure were seen underpinning equities, though investors were also weighing the prospect of partially offsetting tax hikes.

Bullish investors are looking for a continuation of the so-called reflation trade, with expectations for U.S. economic growth to surge as past rounds of spending and vaccine rollouts allow a broader reopening of businesses, while pandemic-related snags in supply chains could exacerbate inflationary pressures, at least over the near term.

Those expectations have helped fuel a rise in bond yields, which have reinforced a rotation away from technolgy shares and other growth-oriented companies toward more cyclically sensitive shares expected to benefit more from the economic reopening.

“We think investors should continue to position for reflation, especially as inflation, stimulus, and economic growth begin to pick up speed,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “But while higher yields will continue to spark uneasiness among growth stocks, long-term investors could use volatility as a way to build up strategic positions in select growth themes, as well.”

New home sales occurred at a seasonally-adjusted annual rate of 775,000 in February, according to the U.S. Census Bureau. That was 18.2% down from the upwardly-revised pace of 948,000 in January and well below the consensus forecast of 879,000.

Which stocks are in focus?
  • Shares of ViacomCBS Inc.
    VIAC,
    -6.30%

    VIACA,
    -6.31%
    ,
    one of the top performers of the pandemic, fell 6.8% after the media company said it started an offering of $3 billion worth of equity securities. Shares are up 150% over the past 12 months.

  • GameStop
    GME,
    -2.90%

    on Tuesday after the close is expected to report earnings per share of $1.35, or $88 million, on $2.211 billion in revenue for the fourth quarter, according to the consensus estimates of six analysts surveyed by FactSet. Shares were down nearly 5%.
  • Microsoft Corp.
    MSFT,
    +1.95%

    is in discussions to purchase videogame-focused chat platform Discord for more than $10 billion, according to a report by Bloomberg News. Microsoft shares rose 1.6%.
How are other markets trading?
  • The yield on the 10-year U.S. Treasury note
    TMUBMUSD10Y,
    1.652%

    fell 4.6 basis points to 1.644%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index
    DXY,
    +0.56%
    ,
    a measure of the currency against a basket of six major rivals, was up 0.4%.
  • Oil futures fell sharply as rising COVID-19 cases prompted extended lockdowns in Europe, with the U.S. benchmark
    CL.1,
    -4.32%

    down 4.3% at $58.92 a barrel on the New York Mercantile Exchange.
  • Gold futures edged lower, with the April contract
    GCJ21,
    -0.74%

    down 0.7% at $1,725.20 an ounce.
  • In Europe, the Stoxx 600 index
    SXXP,
    -0.20%

    fell 0.2%, while London’s FTSE 100
    UKX,
    -0.40%

    declined 0.4%.
  • In Asia, the Shanghai Composite
    SHCOMP,
    -0.93%

    fell 0.9%, Hong Kong’s Hang Seng Index
    HSI,
    -1.34%

    tumbled 1.3% and Japan’s Nikkei 225
    NIK,
    -0.61%

    dropped 0.6%.

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