Day Traders Diary
The Dow Jones Industrial Average bounced back from steep losses and closed the session in the green on Tuesday after Federal Reserve Chair Jerome Powell relieved some of the concerns about higher interest rates and inflation.
The blue-chip Dow wiped out a 360-point loss and closed 15 points higher at 31,537. The S&P 500 also reversed a 1.8% loss and ended the day higher at 3,881. The Nasdaq Composite slipped 0.5% to 13,465 after dropping as much as 3.9%. At its session low, the tech-heavy benchmark fell below its 50-day moving average.
The intraday turnaround came after Powell said in his testimony to Congress that inflation is still "soft" and the economic outlook is still "highly uncertain," easing fears of a policy change by the central bank.
Inflation fears have risen in recent weeks amid a sharp rise in bond yields as policymakers debate another round of economic relief. Investors worry that a spike in prices due to federal stimulus could force the central bank to raise short-term borrowing costs.
High-flying tech stocks, which came under pressure amid higher interest rates, pared losses after Powell's remarks. Tesla closed 2.2% lower after sliding as much as 13% earlier. The electric car maker suffered a 9% decline in the previous session. Apple's stock dipped just 0.1% after falling 6% earlier.
Energy and financials — two of the best-performing sectors this year — once again supported the market Tuesday as investors snap up names they think will benefit from an economic recovery. The energy sector gained 1.6%, bringing its 2021 rally to nearly 27%.
Jonathan Golub, Credit Suisse's chief U.S. equity strategist, believes cyclical stocks will lead the market to new highs in the rest of the year on the back of earnings upside and optimism on the economic reopening.
Credit Suisse upped its S&P 500 year-end target to 4,300 from 4,200 previously. The new forecast represents a 11.5% rally from here.
Small caps were the relater underperformer with the Russell 2000 dropping 0.9% Tuesday, paring its February gained to 7.6%. These beaten-down value shares have been outperforming the S&P 500 in 2021 amid optimism toward the vaccine rollout and the economic reopening.
The 10-year Treasury yield, which has risen steadily since the start of 2021, held steady on Tuesday around 1.36%. So far this month, the benchmark rate has moved up hefty 28 basis points. The 30-year yield touched a one-year high of 2.2% Monday. A basis point is 0.01%.
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