The S&P 500 Index roared back to erase a drop, ultimately ending the day higher following reassuring comments from Federal Reserve Chairman Jerome Powell on inflation and the outlook for growth spurred traders to buy the dip.
The benchmark stock gauge closed 0.1% higher after a decline of as much as 1.8% amid a rout in technology shares on concern the high-flying stocks had become overvalued. The Nasdaq 100 also ended slightly lower, significantly erasing a loss of about 3.5% after Powell signaled that the Federal Reserve was not close to pulling back on its economic stimulus package. Airlines, lodging companies and cyclical shares will benefit from the end of pandemic lockdowns outperformed.
So-called growth shares seem to be having their worst month against value counterparts in overtwenty years as vaccination campaigns gather pace and bond yields hover near a one-year high. Bets on faster growth have pushed the gap between 5- and 30-year yields, which are the highest levels in over six years.
As Powell reassured investors on stimulus, he stated his expectations for a return to more normal, improved activity later in the year,saying that higher bond yields reflected economic optimism and not inflation fears. That has helped to fuel a return of the buy-the-dip mentality that has limited equity drawdowns in recent months, as investors bet on a global economic recovery spurred by vaccines and U.S. spending.
“There was something in there for everyone today,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, stated in a Bloomberg TV interview. “Powell did recognize medium-term improvement in the economy but I think laid to rest some percolating inflation fears.”
Elsewhere, Asian stocks were mostly higher as European shares slumped. Bitcoin tumbled below $50,000 after a bout of volatility underlined lingering doubts about the durability of the token’s rally.
Some key events to look out for in the coming week include the EIA crude oil inventory report as finance ministers and central bankers from the Group of 20 meet virtually Friday, with U.S. Treasury Secretary Janet Yellenbeing among the attendees.
The S&P 500 Index rose 0.1% as of 4 p.m New York time, with the Stoxx Europe 600 Index falling 0.4% while the MSCI Asia Pacific Index rose 0.1%.
On the currencies side, the Bloomberg Dollar Spot Index depreciated 0.1%, with the euro falling 0.1% to $1.215 while the British pound rose 0.4% to $1.4114 and the Japanese yen fell 0.2% to 105.27 per dollar.
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