Home > Stocks bounce, bond yields retreat after Powell’s comments on rates- Market update

Stocks bounce, bond yields retreat after Powell’s comments on rates- Market update

  • The major US stocks indexes closed higher on Tuesday after shares rallied on positive comments from Fed Chair Jerome Powell
  • Declines for the 10-Year US Treasury yield also acted as a catalyst for stocks, said CNBC’s “Mad Money” host Jim Cramer.

US stocks rallied on Tuesday to see the week’s bounce continue after a rough start to the year last week. The Dow Jones Industrial Average closed 0.51% higher, while the S&P 500 and Nasdaq Composite gained 0.92% and 1.41%.

According to CNBC’s Jim Cramer, the rebound in the stock market followed what he termed as “too much good news to ignore.”  The “Mad Money” host pointed to Fed Chair Jerome Powell’s comments about interest rates and a slowdown for the US 10-Year Treasury yield as the two most favourable triggers of the upside.

On Tuesday, Powell told the Senate Banking Committee that a reduction of its nearly $9 trillion balance sheet “wasn’t imminent.”

Meanwhile, the 10-Year US Treasury yield on Tuesday declined from highs near 1.80%, falling to around 1.75%.

Commenting on the upside, Cramer noted:

You have to be ready for these because a stock market that dies by the bond market’s sword can also prosper from it.”

The upside in stocks happened even as JPMorgan CEO Jamie Dimon noted that the market should prepare for a rough 2022, adding that the Fed could go for four or more interest rate hikes this year.

What other experts say about Fed’s tightening

Economist Peter Schiff is unconvinced the Fed is on the right track when it comes to fighting inflation that has hit a four-decade high.

On Monday, legendary trader Paul Tudor Jones said that Fed’s tightening cycle could see stocks that flourished during the pandemic suffer. He also noted that commodities were massively undervalued and would outperform financial markets over the next five years.

But Fundstrat’s Tom Lee says the Fed’s interest rate hikes won’t put an end to the bull market. Rather, he sees stocks selling 10% or so as has historically happened since the central bank started raising rates.

Apple and Amazon among top gainers

Some biggest gainers on the day included Boeing Co (BA) +3.19%, Chevron (CVX) with +2.34%, Salesforce (CRM) with 2.22% and Apple (AAPL) that rose 1.68%. Amazon also edged higher to close at +2.4% while Meta Platforms (FB) gained 1.92%.

Rivian, which had faced downward pressure on Monday and early Tuesday, also bounced higher. The carmaker’s stock fell after it announced missing its electric vehicle production target for 2021. Tuesday’s reversal saw the stock close 2.6% higher. 

IBM, Procter & Gamble and Johnson & Johnson were some of the biggest losers with declines of between 1% and 2%.

Oil, gold, Bitcoin

Elsewhere in the market, oil prices rose as concerns over supply cooled. West Texas Intermediate crude climbed 4.42% to $81.70 per barrel while Brent crude rose 4.36% to $83.78 per barrel.

Meanwhile, gold held steady above $1,800 per ounce, reaching highs of $1,822 per ounce. Spot silver dipped slightly to $22.78.

Bitcoin flipped higher after Monday’s sell-off, breaking above $42,000 to reverse losses suffered on Monday.

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