U.S. stocks ended a wild session not far from where they started, thanks to a bounceback in shares of technology companies.
The broad S&P 500 index ended up eking out a 0.1% gain to snap a five-session losing streak after falling as much as 1.8% earlier in the session. Federal Reserve Chairman
kicked off the turnaround by tamping down inflation worries that had reared from a recent rise in bond yields.
“The economy is a long way from our employment and inflation goals,” Mr. Powell said at a hearing of the Senate Banking Committee Tuesday morning, adding that a substantial recovery “is likely to take some time.”
A sharp rise in yields on U.S. government bonds in recent days has sapped investors’ appetite for riskier assets, including stocks. Shares in technology companies, which have powered the broader market higher for much of the past year, are seen as particularly vulnerable, thanks to high valuations. Their profits become less valuable in today’s terms when investors apply a higher discount rate, thanks to rising 10-year Treasury yields.
Those concerns weighed heavily on investors on Tuesday morning.
Before Mr. Powell’s comments, the tech-heavy Nasdaq Composite Index dropped as much as 4% and investor favorites including Tesla and Moderna logged double-digit losses. After Mr. Powell started talking, shares of technology companies recouped most of their losses, helping to alleviate pressure on the Dow industrials, which also closed higher. The blue-chip index added 15.66 points, or less than 0.1%, to 31537.35.
The Nasdaq remained stuck in the red, closing down 67.85 points, or 0.5%, to 13465.20. The tech-heavy index has fallen five of the past six trading sessions, leaving it off 4.5% from its Feb. 12 high.
The rise in bond yields “naturally does cause investors and cause markets to re-examine the view on equities,” said Paul Jackson, global head of asset allocation research at Invesco. Investing in government bonds is beginning to look more attractive for the first time in months, he said.
But “the level at which bond yields become truly problematic for equities is a long way from where we are now,” Mr. Jackson added.