UPDATE: Dow ends shy of 32,000 milestone, books record as Powell testimony awakes bulls on Wall Street
By Andrea Riquier and Joy Wiltermuth
Oil settles above $63 a barrel, a 13-month high
The Dow Jones Industrial Average on Wednesday closed at a record, just shy of the 32,000 milestone, after Federal Reserve officials helped calm frayed market nerves after a run-up in bond yields briefly unsettled the bullish investing mood that's prevailed for weeks on Wall Street.
Chairman Jerome Powell's second day of dovish testimony helped give a boost to major benchmarks and the Fed's No. 2, Richard Clarida, said the economy is primed to show big improvement this year, owing to more Americans getting vaccinated and the passage of fiscal-spending packages.
How did major benchmarks do?
In One Chart:The stock market's COVID meltdown began a year ago: Here's how every major asset has performed since then (https://www.marketwatch.com/story/its-the-anniversary-of-the-stock-markets-covid-meltdown-heres-how-assets-have-performed-over-the-last-12-months-11614194197?mod=home-page)
The Dow on Tuesday erased a loss of more than 360 points to eke out a positive finish, while the S&P 500 snapped a five-day losing streak and the Nasdaq Composite trimmed a loss of nearly 4% to end the session only 0.5% lower.
What drove the market?
The bulls were back in charge on Wall Street.
Fed Chair Powell said the focus remains on helping the economy heal from the pandemic, and that the time isn't right to worry about the growing national deficit or climbing bond yields, helping stocks extend gains.
"The time to give priority to those concerns isn't now," Powell told a House committee on Wednesday, during his second day of testimony to Congress on the outlook for the economy and the central bank's monetary policy.
Recap: Powell returns to Capitol Hill for second day of testimon (https://www.marketwatch.com/story/powell-returns-to-capitol-hill-for-2nd-day-of-testimony-live-blog-2021-02-24?mod=newsviewer_click)y
"Right now," Powell said, "Fiscal policy is appropriately working."
Meanwhile, Fed Vice Chairman Richard Clarida said in a speech (https://www.marketwatch.com/story/feds-clarida-sees-brighter-economy-in-2021-but-hes-not-worried-about-inflation-11614190792?mod=mw_latestnews) to the U.S. Chamber of Commerce on Wednesday that the downside risk to the outlook for the economy in 2021 has diminished amid "the development of several effective vaccines and the passage by the Congress in late December of a package of fiscal relief measures."
Bond yields edged higher again Wednesday, while stocks shrugged off earlier losses.
"What Powell has been saying is that bond yields are rising for the right reason," said Patrick Leary, chief market strategist and senior trader at broker-dealer Incapital, pointing to improved economic data and optimism around the ramping up vaccine rollout.
Leary also suggested that rising bond yields may be doing the Fed's work for it, in terms of keeping equities and other asset prices in check, after they have soared despite the economic carnage of the pandemic. "They are naturally taking the froth out, without causing the Fed to make a major policy decision of raising interest rates, tapering its asset purchases or something else to cool down financial markets," he said of climbing bond yields.
Read:Has Powell lost control of yields or is latest surge part of the Fed's playbook? (https://www.marketwatch.com/story/has-powell-lost-control-of-yields-or-is-latest-surge-part-of-the-feds-playbook-11614182314)
On the vaccination front, the Food and Drug Administration said that Johnson & Johnson's single-dose COVID-19 vaccine candidate has no unexpected safety concerns (https://www.marketwatch.com/story/fda-says-j-js-covid-19-vaccine-has-no-specific-safety-concerns-11614174846), a step that moves the experimental vaccine one step closer to emergency authorization.
"News like this is good for the other parts of the market that didn't rally last year," said Brian Vendig, president of Westport, Connecticut-based MJP Wealth Advisors, in an interview with MarketWatch.
Vendig pointed to sectors, like industrials (XLI), materials (XLB), and energy (XLE) that should benefit as more of the nation gets vaccinated and the economy more broadly reopens. Even shares of hard-hit cruise liners have staged a considerable recovery roughly a year since U.S. health officials (https://www.wsj.com/articles/grand-princess-to-bring-passengers-to-oakland-for-medical-care-testing-11583677515)began to block big ships from docking in local harbors in an effort to contain the coronavirus spread. Royal Caribbean Group(RCL) shares traded near a one-year high Wednesday.
Powell's second day of testimony reiterated themes from Tuesday, namely that the economy remained far off the Fed's employment and inflation goals (https://www.marketwatch.com/story/feds-powell-says-economy-could-improve-later-this-year-but-sees-no-change-in-policy-11614092422?mod=mw_latestnews), while giving no indication a spike in bond yields would prompt the central bank to begin tapering its asset-buying program. Fears the Fed could move to scale back stimulus sooner than anticipated had been blamed for the stock market's recent wobble, which hit highflying, tech-oriented and growth shares hardest, while stocks more sensitive to the economic cycle benefited.
Read: Here are 3 reasons why the stock market can survive rising bond yields in 2021 (https://www.marketwatch.com/story/3-reasons-why-the-stock-market-might-be-able-to-survive-rising-bond-yields-in-2021-11614119111)
Fed Gov. Lael Brainard on Wednesday also emphasized the need for continued fiscal and monetary support for the U.S. economy, which she said remains far from achieving the central bank's employment and inflation goals, in lecture at Harvard.
In economic data, sales of newly constructed houses (https://www.census.gov/construction/nrs/pdf/newressales.pdf) ran at a 923,000 seasonally adjusted annual rate in January, trouncing the MarketWatch consensus of an 850,000 rate.
Which companies were in focus?
How did other markets perform?
William Watts contributed reporting
-Andrea Riquier; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
February 24, 2021 16:41 ET (21:41 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.