US Stocks Slide in 2-Day Losing Streak, Nasdaq Drops 2%
26 Mar 2021 · 3rd Party Analysis
- US stock market ends a second straight session in the red
- Investors digest a second round of Yellen and Powell testimonies
US equity markets drop in response to tech stocks
US equity markets slid for another day on Wednesday. This was due to investors that remained uncertain over the short-term outlook. This applied mostly in tech stocks, but also the broader market. For a second day, market participants turned their attention to the testimonies of Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.
The pullback in tech stocks brought the Nasdaq Composite to a close in negative territory, down 2.01%, or 265.81 points. The tech-heavy index ended the session at 12,961.89. The S&P500 gave up an early gain during the session and turned lower by 0.55%, or 21.38, to end at 3,889.14. The Dow Jones Industrial Average slipped by only 3 points, or 0.01%, as oil prices lifted value stocks. The 30-stock index closed at 32,410.06.
Equities were trading mixed on Wednesday with a sell off in the tech sector and a strong move to the upside in the value sector. Investors’ jitters spurred by a rise in bond yields continue to hit the tech-focused Nasdaq Composite. Tech stocks suffered losses for a second straight day. The broad growth sector has been out of favor recently for its sensitivity to changes in long-term interest rates. Higher rates hurt the valuation of profits in the future and investors have been rotating to cyclical real-economy stocks that tend to do well in a rising rate environment. Highflying tech stocks like Apple, Facebook and Netflix, all closed lower by more than 2% a piece, while Tesla dropped by nearly 5%, or $31.89, to $630.27.
Powell and Yellen Testimonies
Jerome Powell, Fed Chairman, gave his testimony for a second day, this time before the Senate banking committee. In his speech, he tried to ease concerns that inflation might get out of control. Mr. Powell reiterated the central bank’s commitment to support the economy on the path towards a complete recovery from the pandemic. He also tried to inspire confidence in investors that the economy will not overheat. There were speculations about this due to the injection of $1.9tn stimulus package approved earlier in the month.
“There’s been an underlying sense of an improved economic outlook, and that has to be part of why rates would move back up from the extraordinary low levels that we’re at — back up towards levels that we’re more likely to see, and that has been an orderly process,” Mr. Powell said during his speech. He noted that a rise in bond yields “reflects a sense of improved economic outlook”. The Fed Chair continued by adding: “I would be concerned if it were not an orderly process or if conditions would have tightened to the point where they might threaten our recovery.”
At the online hearing, Jerome Powell was joined by the US Treasury Secretary Janet Yellen, who served as the previous Federal Reserve Chair. Her remarks included an approval of the fiscal stimulus bill. She also reaffirmed that the economy is set for a quick rebound that would bring the job market to pre-pandemic levels. According to Ms. Yellen, the US economy is expected to return to full employment by 2022.