(Bloomberg) — Stocks fluctuated as traders awaited clarity from Federal Reserve Chairman Jerome Powell on how the central bank is perceiving the recent spike in Treasury yields.
The S&P 500 was little changed as energy producers joined a surge in oil, offsetting losses in technology shares. The Nasdaq Composite briefly wiped out its 2021 advance, while the Dow Jones Industrial Average outperformed. Bonds were reasonably steady after benchmark 10-year yields approached 1.5%. Mortgages rose above 3% for the first time in seven months — raising concerns that higher borrowing costs will derail the pandemic housing rally.
Powell is expected to use his appearance at a Wall Street Journal event Thursday to reaffirm his looser-for-longer stance for monetary policy and to make clear he’d like to avoid a repeat of last week’s bond-market chaos. In a congressional testimony last month, the Fed chief downplayed concerns that rising yields would hurt the economy, instead declaring at one point that they were a “statement of confidence” in the outlook. The 10-year Treasury note yield briefly spiked to 1.6% on the next day.
“The Fed Chair will do his best to quell talks of QE tapering during his much-anticipated speech about the U.S. economy at an online event,” Fawad Razaqzada, an analyst at ThinkMarkets, said, referring to quantitative easing. “However, Powell can’t be too dovish either as he will also need to address worries about inflation. So, he will have a tough job convincing the markets that Fed’s policy is on the right path. Stocks may drop further if he’s unable to do so.”
The cost of borrowing U.S. Treasury 10-year notes continues to spiral higher despite record-size auctions, fueled by a growing pool of investors who want to bet on higher yields. With investors from Japan and elsewhere joining the furious selling of bonds, the repo market has its eyes firmly focused on next week’s auction of additional 10-year notes as a potential release valve. The size of that sale is due to be confirmed Thursday at 11 a.m. in Washington.
Some key events to watch this week:
The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.
These are some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 10:47 a.m. New York time.The Stoxx Europe 600 Index fell 0.6%.The MSCI Asia Pacific Index dipped 2.2%.The MSCI Emerging Market Index declined 2.3%.
Currencies
The Bloomberg Dollar Spot Index rose 0.1%.The euro decreased 0.3% to $1.2025.The Japanese yen depreciated 0.5% to 107.54 per dollar.
Bonds
The yield on 10-year Treasuries fell two basis points to 1.46%.Germany’s 10-year yield decreased four basis points to -0.33%.Britain’s 10-year yield dipped seven basis points to 0.714%.
Commodities
West Texas Intermediate crude climbed 2.3% to $62.70 a barrel.Gold strengthened 0.1% to $1,712.46 an ounce.
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