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Stocks Drop Amid Powell’s Testimony

Stocks Drop Amid Powell’s Testimony


U.S. stocks edged down Tuesday as investors digested testimony by Federal Reserve Chairman Jerome Powell about the U.S. economy.

The S&P 500 ticked down 0.8% as of the 4 p.m. close of trading in New York. The Nasdaq Composite fell 1.1%, while the Dow Jones Industrial Average fell 0.9%.

Mr. Powell, in a joint appearance with Treasury Secretary Janet Yellen, reiterated in a congressional hearing that the central bank will continue providing support to the economy through loose monetary policy. Mr. Powell also said he doesn’t expect the $1.9 trillion stimulus package will lead to an increase in inflation, but he emphasized that the central bank has tools to deal with rising price pressures if necessary.

Investors are also reassessing their expectations for a fast and widespread global recovery, which had led to rising bets earlier this year that companies sensitive to an economic recovery would benefit. Rising Covid-19 cases in Europe and recent extensions to lockdowns in Germany, France and Italy are also weighing on sentiment.

“It feels like the reflation theme is running into a few roadblocks,” said Sebastian Mackay, a multiasset fund manager at Invesco. “We are probably in a cyclical recovery, but we may have gotten ahead of ourselves. This is a pause for thought: how rapid is this recovery actually going to be?”



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