The Dow Jones Industrial Average on Wednesday closed at a record, just shy of the 32,000 milestone, after Federal Reserve officials helped calm frayed market nerves after a run-up in bond yields briefly unsettled the bullish investing mood that’s prevailed for weeks on Wall Street.
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Chairman Jerome Powell’s second day of dovish testimony helped give a boost to major benchmarks and the Fed’s No. 2, Richard Clarida, said the economy is primed to show big improvement this year, owing to more Americans getting vaccinated and the passage of fiscal-spending packages.
How did major benchmarks do?
- The Dow Jones Industrial Average DJIA, +1.35% rose 424.51 points, or 1.4%, to close at a record 31,961.86, its 10th of the year.
- The S&P 500 SPX, +1.14% advanced 44.06 points, or 1.1%, to end at 3,925.43, extending its win streak to a second day.
- The Nasdaq Composite COMP, +0.99% added 132.77 points, up 1%, finishing at 13,597.97 to snap a 2-day losing streak. 5sw
The Dow on Tuesday erased a loss of more than 360 points to eke out a positive finish, while the S&P 500 snapped a five-day losing streak and the Nasdaq Composite trimmed a loss of nearly 4% to end the session only 0.5% lower.
What drove the market?
The bulls were back in charge on Wall Street.
Fed Chair Powell said the focus remains on helping the economy heal from the pandemic, and that the time isn’t right to worry about the growing national deficit or climbing bond yields, helping stocks extend gains.
“The time to give priority to those concerns isn’t now,” Powell told a House committee on Wednesday, during his second day of testimony to Congress on the outlook for the economy and the central bank’s monetary policy.
“Right now,” Powell said, “Fiscal policy is appropriately working.”
Meanwhile, Fed Vice Chairman Richard Clarida said in a speech to the U.S. Chamber of Commerce on Wednesday that the downside risk to the outlook for the economy in 2021 has diminished amid “the development of several effective vaccines and the passage by the Congress in late December of a package of fiscal relief measures.”
Bond yields edged higher again Wednesday, while stocks shrugged off earlier losses.
“What Powell has been saying is that bond yields are rising for the right reason,” said Patrick Leary, chief market strategist and senior trader at broker-dealer Incapital, pointing to improved economic data and optimism around the ramping up vaccine rollout.
Leary also suggested that rising bond yields may be doing the Fed’s work for it, in terms of keeping equities and other asset prices in check, after they have soared despite the economic carnage of the pandemic. “They are naturally taking the froth out, without causing the Fed to make a major policy decision of raising interest rates, tapering its asset purchases or something else to cool down financial markets,” he said of climbing bond yields.
On the vaccination front, the Food and Drug Administration said that Johnson & Johnson’s single-dose COVID-19 vaccine candidate has no unexpected safety concerns, a step that moves the experimental vaccine one step closer to emergency authorization.
“News like this is good for the other parts of the market that didn’t rally last year,” said Brian Vendig, president of Westport, Connecticut-based MJP Wealth Advisors, in an interview with MarketWatch.
Vendig pointed to sectors, like industrials XLI, +1.89%, materials XLB, +0.87%, and energy XLE, +3.54% that should benefit as more of the nation gets vaccinated and the economy more broadly reopens. Even shares of hard-hit cruise liners have staged a considerable recovery roughly a year since U.S. health officials began to block big ships from docking in local harbors in an effort to contain the coronavirus spread. Royal Caribbean Group RCL, +7.34% shares traded near a one-year high Wednesday.
Powell’s second day of testimony reiterated themes from Tuesday, namely that the economy remained far off the Fed’s employment and inflation goals, while giving no indication a spike in bond yields would prompt the central bank to begin tapering its asset-buying program. Fears the Fed could move to scale back stimulus sooner than anticipated had been blamed for the stock market’s recent wobble, which hit highflying, tech-oriented and growth shares hardest, while stocks more sensitive to the economic cycle benefited.
Fed Gov. Lael Brainard on Wednesday also emphasized the need for continued fiscal and monetary support for the U.S. economy, which she said remains far from achieving the central bank’s employment and inflation goals, in lecture at Harvard.
In economic data, sales of newly constructed houses ran at a 923,000 seasonally adjusted annual rate in January, trouncing the MarketWatch consensus of an 850,000 rate.
Which companies were in focus?
- GameStop Corp. GME, +103.94% shares soared 103.9% Wednesday, after a trading halt and a day after its chief financial office announced his resignation from the retailer, which has become a popular “meme stock,” gathering support form traders using Reddit and other social-media posts, but also regulatory scrutiny.
- Tesla Inc. TSLA, +6.18% stock jumped 6.2% after one of its biggest investors, ARK Invest, piled into shares of the electric-car maker amid a steep selloff. Shares remain down 5% so far this week.
- Shares of Square Inc. SQ, -7.51% shed 7.5% after the company late Tuesday said surging interest in bitcoin and equities trading among Cash App customers helped more than double revenue for its latest quarter. The company also doubled down on its own interest in bitcoin by announcing a new $170 million purchase of the cryptocurrency.
- Intuit Inc. INTU, +3.53% shares rose 3.5% after the financial-services company reported fiscal second-quarter results late Tuesday.
- Shares of aluminum-products maker Arconic Corp. ARNC, +0.96% advanced 1% after it reported a surprise fourth-quarter loss late Tuesday but delivered revenues that were above forecasts.
- Lowe’s Cos. LOW, -3.73% shares fell 3.7% after the home improvement retailer delivered fiscal fourth-quarter profit and sales that topped expectations, and said it planned to buy back $9 billion worth of its stock this year.
- Shares of Casper Sleep Inc. CSPR, -3.17% fell 3.2% after the mattress company reported fourth-quarter revenue that beat expectations, and narrower-than-expected losses.
- Bausch Health Cos. Inc. BHC, -1.65% shares fell 1.7% after the pharmaceuticals and medical devices company said it reached an agreement with billionaire activist investor Carl Icahn to add two of his nominees to its board of directors.
- Six Flags Entertainment Corp. SIX, +4.60% shares gained 4.6% after the company reported a wider-than-expected loss for the third straight quarter, but saw fourth-quarter revenue fell less than expected as those who did attend the company’s theme parks spent more than forecast.
- Exxon Mobil Corp. XOM, +3.00% on Wednesday said it had agreed to sell most of its non-operated upstream assets in the U.K. central and northern North Sea to HitecVision for more than $1 billion. Shares gained 3%.
- Shares of Johnson & Johnson JNJ, +1.34% added 1.3% after the Food and Drug Administration said the company’s single-dose COVID-19 vaccine candidate has no unexpected safety concerns, moving it a step closer to distribution.
How did other markets perform?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 1.377% added 2.5 basis points to 1.388% as inflation fears continue to dog markets. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index, DXY, -0.12% a measure of the currency against a basket of six major rivals, ticked up less than 0.1%.
- Oil futures jumped to a 13-week high, with the U.S. benchmark CL.1, +0.51% up 2.5% to settle at $63.22 a barrel, after data from the U.S. government showed weekly crude supplies edged higher. April gold futures GCJ21, +0.29% slumped 0.4% to settle at $1,797.90 an ounce as yields resumed their upward march.
- In overseas stock trading, the pan-European Stoxx 600 SXXP, +0.46% and London’s FTSE 100 UKX, +0.50% both closed up 0.5%. In Asia, the Shanghai Composite SHCOMP, -1.99% fell 2%, while Hong Kong’s Hang Seng Index HSI, -2.99% slumped 3%.
William Watts contributed reporting