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US Stocks Rise; S&P 500 Near Record 06/22 15:49
Stocks rose on Wall Street Tuesday, nudging the S&P 500 toward its record
high, as the head of the Federal Reserve said again that inflation looks to be
only a temporary problem for the economy and markets.
NEW YORK (AP) -- Stocks rose on Wall Street Tuesday, nudging the S&P 500
toward its record high, as the head of the Federal Reserve said again that
inflation looks to be only a temporary problem for the economy and markets.
The S&P 500 climbed 21.65, or 0.5%, to 4,246.44 after Fed Chair Jerome
Powell's comments helped further calm markets, which were jolted by last week's
announcement that the Fed has begun planning to eventually offer less support
to the economy. The S&P 500 got back within 0.2% of its all-time high set two
Mondays ago, after dropping as much as 2.1%.
The Dow Jones Industrial Average gained 68.61 points, or 0.2%, to 33,945.58,
and the Nasdaq composite rose 111.79, or 0.8%, to 14,253.27.
Indexes started the day off mixed, but they rose more convincingly as Powell
told a Congressional subcommittee that the burst of inflation hitting the
economy is mostly confined to areas hemmed in by shortages of supplies. That's
why he expects inflation, which hit 5% last month, to subside as the economy
gets further into its reawakening.
He pointed in particular to rising prices for used cars, airfares and other
things where a newfound flood of dollars is chasing after a limited supply of
goods and services. He admitted that price gains in those areas have been
larger than the Fed initially expected, but he remained resolute in calling
them only temporary.
"The incoming data are very much consistent with the view that these are
factors that will wane over time," he said.
If the Fed is wrong, and if inflation does end up being a longer-lasting
problem, it would force the central bank to get more aggressive about raising
interest rates higher and faster off their record lows.
Markets are just getting used to the idea of the Fed making any moves at
all. For more than a year, they've enjoyed investing on easy-mode as super-low
rates propped up prices. Last week, though, the Fed indicated it may begin
raising short-term rates by late 2023, earlier than expected. It also discussed
easing up on programs meant to keep longer-term rates low.
Trading is likely to get bumpier through the summer as economic reports may
give sometimes conflicting signals about inflation and other key data amid a
recovering economy, said Katie Nixon, chief investment officer at Northern
Trust Wealth Management.
"What investors are going to have to do is just buckle up," she said. "The
data is going to be very noisy; we could get some numbers that create some
anxiety."
The key, she said, is to stay calm and not overreact to any one signal or
piece of data.
Markets are sitting close to their records, but that's masked plenty of
churning happening underneath the surface since the Fed's announcement last
week.
The market's initial move was to send stocks lower and bond yields higher.
But the reaction has diffused as investors focus more on the Fed's saying that
it still plans to keep up its support for markets for a while.
Longer-term Treasury yields have fallen back after their initial spike, for
example. The 10-year yield dipped to 1.46% from 1.48% late Monday.
Shorter-term yields, which move more on expectations for Fed moves on the
federal funds rate, have also regressed a bit. The two-year Treasury yield fell
back to 0.22% from 0.27% late Monday, but it's still well above its 0.16% level
from before the Fed's meeting.
In the stock market, companies whose profits most need a strengthening
economy to flourish have swung out of and back into favor. They've been trading
places with Big Tech stocks and other winners of the pandemic, which have
seemed able to grow almost regardless of the economy.
GameStop rose 10% after the company said it had raised $1.1 billion after
selling 5 million new shares to investors. The company captivated Wall Street
earlier this year, after a band of smaller-pocketed investors piled into it
together and sent its price way beyond what professional analysts said was
reasonable.
Retailers and tech companies were also particularly strong. Gains for Apple,
Amazon and Microsoft, which all rose at least 1.1%, were the biggest reasons
for the S&P 500's climb.
In cryptocurrencies, prices continued to swing sharply after Chinese banks
said they would step up enforcement on a government ban.
Bitcoin was trading at a little less than $33,000, according to Coindesk.
Earlier in the day, it fell below $30,000, about where it started the year,
after more than halving from its high of $64,829.14 in April.
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