Markets slip as bond yields gain after Powell comments

Nasdag

Dow, Nasdaq and S&P 500 all down yesterday, Thursday 4th March 2021, as bond yields increase, then stabilise later

The US 10-year Treasury yield rose close to 1.59%

The Nasdaq lost 2.1% to close down at: 12723 as tech stocks were sold. The S&P 500 and Dow were also affected by the tech sell-off. The S&P 500 fell 1.3% and the Dow was also down 1.1% as financial and energy stocks managed to dodge the bullet. The FTSE 100 lost just 25 points.

The Nasdaq has fallen 9.7% from its February high of: 14095 . A drop of 1372 points, bringing it very close to ‘correction’ territory.

The U.S. 10.year treasury yield climbed to 1.59%

What did Powell say?

As yields surged and the sell-off in tech stocks gained momentum, pulling the whole market down, Fed chair Powell refrained from taking or signalling any action.

The Fed is very accommodative and will usually intervene to maintain stability, but this time the Fed has allowed the ‘market’ to be a ‘market‘. A refreshing change for it to be left to its own devices to do its ‘thing’.

Powell was content with the current pace of policy. He didn’t signal the Fed was in any rush to do anything about the rising yields.

Forecast

Powell said the Fed would need to see a broader increase across the rate spectrum before considering any action and said that the current policy stance is appropriate.

He also said, ‘We monitor a broad range of financial conditions and we think that we are a long way from our goals. I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals’.

So, the Fed was less accommodative than usual but remains highly accommodative. But not riding to the rescue just yet…

Up next – one to watch

U.S. job data today, Friday 5th March 2021. Data due for release at: 13:30 UK time.

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