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March 4, 2021, 4:22 p.m. EST

Dow slides, Nasdaq hits three-month low after Powell struggles to soothe bond market

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By Sunny Oh and Mark DeCambre

Stock benchmarks on Thursday fell for a third day, led by technology stocks, as Federal Reserve Chairman Jerome Powell said he was monitoring the recent rise in bond yields but added that the rise in inflation expected this year was unlikely to last and current monetary policy remained appropriate.

His remarks failed to soothe jittery bond markets, with the 10-year Treasury yield rising back above 1.50%.

How are stock benchmarks performing?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.75% ended 345.95 points, or 1.1%, lower at a one-month nadir of 30,924.14, but up from an intraday low of 30,547.53.

  • The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.68% fell 51.25 points, or 1.3%, to 3,768.47.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.92% slid 274.28 points, or 2.1%, to reach 12,723.47, its lowest in three months. The tech-heavy index came to the brink of recording a 10% loss from its Feb. 12 peak, which would meet the commonly used definition for a correction.

On Wednesday , the Dow fell 121.43 points, or 0.4%, to close at 31,270.09, the S&P 500 shed 50.57 points, 1.3%, ending at 3,819.72, while the Nasdaq Composite Index slid 361.04 points, or 2.7%, to mark its largest two day percentage decline since Tuesday, September 8, 2020.

What’s driving the market?

At The Wall Street Journal Jobs Summit, Powell said he would be concerned about a disorderly move in the bond market , but suggested that it had yet to have a material impact on financial conditions. This comes after previous remarks by Fed officials that they were not overly concerned about the move up in bond yields.

“Chairman Powell’s unwillingness to commit along the lines of yield-curve control or drawing a more aggressive line in the sand is giving a moment of reflection for markets. There is a limit for what the Fed can and is willing to do and markets are now digesting that,” Yung-Yu Ma, chief investment strategist at BMO Wealth Management, told MarketWatch.

Powell’s remarks did not help markets though as investors fretted that if Powell shrugged off the recent rise in bond yields, it could spur further selling in a vulnerable Treasurys market and, in turn, weigh on equities.

 “The real question is how far is the Fed going to let the long-end of the yield curve go. How steep does the curve have to be for them to start worrying,” said Kathryn Kaminski, chief research strategist at AlphaSimplex, in an interview, referring to how the rise in long-term yields has lifted their spread against their shorter-term peers.

The 10-year U.S. Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.17% climbed to 1.55%, up around 8 basis points from where it traded at the end of Wednesday and the highest levels in about a year.

Powell’s comments mark the last from Fed officials before a self-imposed “blackout” period ahead of the next two-day policy meeting starting on March 16.

Some of the volatility on Thursday also reflected a “great rotation” as some analysts describe a shift out of highflying technology stocks, viewed as expensive by some measures, to other areas of the market considered undervalued, including energy and financials.

Analysts say the move reflects how investors are pricing in economic recovery and better times for stocks hit in the past year by the COVID-19 pandemic, reversing some of the gains from technology stocks that thrived under business lockdowns and social-distancing protocols last year.

See : Stock market crash? No, but a rotation away from U.S. tech stocks is shaking up some investors

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
33,821.30
-256.33 -0.75%
Volume: 354.20M
April 20, 2021 5:05p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,134.94
-28.32 -0.68%
Volume: 2.29B
April 20, 2021 5:05p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
13,786.27
-128.50 -0.92%
Volume: 3.81M
April 20, 2021 5:16p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.56
+0.0027 +0.17%
Volume: 0.00
April 21, 2021 12:00a
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