Stocks are mixed on Wall Street on Wednesday (US time) as another surge in bond yields caused big declines in technology stocks. Investors are cautiously awaiting remarks from Federal Reserve chair Jerome Powell, who is expected to speak later in the day on inflation and what the central bank may do to combat it.
In mid-afternoon trade, the S&P 500 is 0.1 per cent higher, the Dow Jones is up 0.5 per cent while the technology-heavy Nasdaq Composite was down 0.2 per cent.
The ASX is set for a positive start to its session, with futures at 5.10am AEDT pointing to a gain of 16 points, or 0.2 per cent, at the open.
Bond yields moved upward again, after being relatively stable for more than a week. The yield on the 10-year US Treasury note hit 1.67 per cent versus 1.62 per cent the day before. It’s now the highest since January 2020.
Rising bond yields gave banks a boost. They rely on higher rates to charge more lucrative interest on loans. Wells Fargo rose 1 per cent. Industrial stocks also made solid gains, with Caterpillar rising 2.6 per cent.
“What we’re seeing is very much aligned with what you would expect in a recovery trade,” said Brian Levitt, global market strategist at Invesco. “We were coming from pretty beaten up places.”
Investors are betting big that the economic malaise will dissipate as spring arrives and more Americans get vaccinated against the coronavirus. The $US1400 ($1802) stimulus checks the Biden administration began sending to individuals last weekend is also helping. But faster economic activity could also translate into some degree of inflation.
Investors are awaiting the Federal Reserve’s economic and interest rate projections, expected later in the day. Economists expect Powell will try to convince jittery financial markets that the central bank can continue providing support without igniting inflation. Those worries have recently pushed bond yields higher.