Dow Industrials Tick Up as Investors Focus on Powell

By Will Horner and Xie Yu

The Dow Jones Industrial Average edged up Wednesday as investors digested fresh comments from Jerome Powell, a day after the Federal Reserve chairman's comments soothed unsettled markets.

Stock markets have wavered in recent days following a strong start to the year, with highflying tech companies leading declines. The Nasdaq has doubled from its lows last March, with companies like Tesla rising even further.

It isn't at all surprising that investors are choosing now to lock in some of those profits, said LPL Financial strategist Jeff Buchbinder. "We've seen this in other bull markets coming off major bear-market lows, " he said. "It makes total sense to take a breather."

Investors said a rise in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.

The blue-chip index gained 0.3% and the S&P 500 added less than 0.1%, while the tech-heavy Nasdaq Composite lost 0.5%.

"This really is a function of economies reopening," said Brian O'Reilly, head of market strategy at Mediolanum Investment Funds. "Bond yields are rising because of good vaccination rates in the U.S. and U.K. and it's prompting a simple rotation away from everything that did well last year, the stay-at-home stocks, to the ones that didn't, the go-outside stocks."

"It's a good story in some ways, in that the market is trying to price in that economies are going to reopen," he added.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, has risen to its highest level in a year this week. On Wednesday, it rose to 1.404%, from 1.363% Tuesday.

Mr. Powell reaffirmed Tuesday his commitment to keeping easy-monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies. He continued his Congressional testimony Wednesday morning in front of the Senate Banking Committee.

While the Fed has stuck to the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors have been expecting, said Paul O'Connor, head of multiasset management at Janus Henderson Investors.

"Markets are expecting that to be a 2022 story, however we are seeing sizable upgrades to U.S. GDP. Somewhere in the middle of this year the discussion around tapering is going to have to take place," he said.

The latest batch of earnings reports will be in focus Wednesday. Nvidia, Booking Holdings and L Brands will release their reports after markets close.

PRA Health Sciences jumped 21% after Dublin-based Icon said it would buy the company in a deal worth roughly $12 billion.

Square fell 7.2% after the payments company reported a lower fourth-quarter profit late Tuesday.

On the economic front, new homes sales rose 19% annualized in January, faster than expected. One concern, though, is that rising lumber prices could force home prices higher, offsetting low mortgage rates.

Bitcoin rose 0.5% to $49,146 Wednesday after falling 13% Tuesday. Other cryptocurrencies that declined Tuesday, such as ether, also gained.

Tesla rose 1.7%. The company's share price has fluctuated along with bitcoin in recent days after the electric-vehicle maker said it had bought $1.5 billion of the cryptocurrency.

Overseas, the pan-continental Stoxx Europe 600 index rose 0.1%.

Companies poised to benefit from an end to movement restrictions were some of the strongest performers. Travel agency TUI rose 10%, while U.K.-listed shares of cruise operator Carnival added 3.7%. Dufry, an operator of duty-free stores, gained 4.4% and airline operator IAG rose 4.2%.

Asia-Pacific indexes slipped. The biggest losses were in Hong Kong, where the city's government moved to capitalize on booming markets by increasing a levy on share trading. Hong Kong's benchmark Hang Seng Index dropped 3%, with Hong Kong Exchanges and Clearing falling 8.8%, even as the exchange operator unveiled record annual revenue and net profit.

Mainland China's CSI 300, which includes large companies listed in either Shenzhen or Shanghai, fell more than 2.5%, with index heavyweight Kweichow Moutai dropping more than 5%. The index has now dropped for four of the five sessions since the Lunar New Year break. Japan's Nikkei 225 fell 1.6%.

Andy Maynard, head of equities at China Renaissance Securities, said investors were getting uneasy about expensive valuations after rapid run-ups in mainland Chinese and Hong Kong markets, particularly against a backdrop of rising bond yields. In a potential sign of growing caution, he noted: "You don't see institutions buying on the dip."

Caitlin Ostroff contributed to this article.

Write to Will Horner at [e-mail] and Xie Yu at [e-mail]

(END) Dow Jones Newswires

02-24-21 1101ET