Stocks were falling Tuesday, as the market waited for Federal Reserve Chair Jerome Powell’s testimony before the Senate later in the day.
Shortly after the open, the Dow Jones Industrial Average was off 171 points, or 0.5%, while the S&P 500 was down 0.2%. The Nasdaq Composite dipped 0.1%, one day after the index snapped a four-day losing streak.
Overseas, the pan-European Stoxx 600 rose 1.2%, while in Asia trading was more subdued amid regional Covid-19 concerns. Tokyo’s Nikkei 225 declined 0.9% as Japan moved to extend stricter border measures until late next month.
Investors continue to adjust to an environment of tighter monetary policy. The Federal Reserve—as signaled last week—is headed for earlier and faster interest-rate increases and eventual quantitative tightening. Expectations are for the central bank to now hike rates multiple times in 2022. This has helped bond yields spike, pressuring shares in tech companies and dogging the Nasdaq for much of the past week.
“Federal Reserve rate hike nerves continue to grow tauter,” said Jeffrey Halley, an analyst at broker Oanda, noting that some market participants were talking about the possibility of four rate increases this year. “I do believe we may be approaching ‘peak Fed-fear’ for now.”
The financial market seemed to indicate as much, as bond yields slipped back from their recent highs. The yield on the benchmark 10-year U.S. Treasury note was trading at 1.78%, unchanged from Monday’s close but lower than the 1.8% reached for the first time since January 2020; it began 2022 with a yield of 1.53%. The fullback in yields is also helping to reduce market volatility.
“We view the recent equity volatility as an adjustment to the Fed’s incrementally more hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management. UBS sees three rate increases from the Fed this year, beginning as soon as March.
Fed Chair Powell will likely have something to say about whether yields remain contained and the stock market continues to calm down. Powell heads to the Senate Banking Committee for his second-term nomination hearing. His prepared remarks indicate inflation and rate increases will be in focus; lawmakers will also have the opportunity to ask questions of the central banker.
The worries, though, do seem to have subsided, at least for now. Even Bitcoin, which has had a tough start to 2022, is bouncing back. Monday saw Bitcoin, the leading cryptocurrency, trade below $40,000 for the first time since September 2020. It was clawing back losses Tuesday and hovered above $42,000.
“It’s been a bad start to the year for the cryptocurrency, having shed around -10% over the first 10 days of the year,” said Jim Reid, a strategist at Deutsche Bank.
It’s been a bad start to the year for nearly everyone.
Here are five stocks on the move Tuesday:
Nokia (ticker: NOK) rose 1.4% in Helsinki, with its U.S.-listed stock up around 2.5% in the premarket trade, after the Finnish telecom group said it expects to exceed its full-year 2021 guidance and be more profitable in 2022.
Pfizer (PFE) was little changed in the U.S. premarket, but its Covid-19 vaccine co-developer BioNTech (BNTX) slipped 1.8%. Pfizer has said it should be able to launch a redesigned vaccine to target the Omicron variant of coronavirus by March.
Rivian (RIVN) slipped 3.9% after the departure of Chief Operating Officer Rodney Copes became public.
Juniper Networks (JNPR) jumped 4.5% after BofA Securities upgraded the stock to Buy from Underperform.
International Business Machines (IBM) fell 3.3% after getting cut to Sell from Neutral at UBS.
Write to Jack Denton at firstname.lastname@example.org