The last several days of fence sitting ended today as Powell’s late session comments yesterday took firm root today and got everyone on a big buying spree again rotating into cyclicals and boosting the Dow a big 424 points. Powell added to his remarks today estimating inflation goals would take three years to achieve thus signaling that Fed policy on interest rates will remain for a long time.  Rising bond yields threaten growth stocks as do concerns over valuations. But all in all, Powell’s statements gave a big boost to confidence in a recovering economy. Volume again fell below the 4-week average at just under 13.7 billion shares traded. 

WED  FEBRUARY 24, 2021  4:54 PM 

Wall Street finishes up as Fed's Powell soothes inflation fears

By Gertrude Chavez-Dreyfuss

DJ: 31,537.35  +15.66        NAS: 13,465.20  -67.85        S&P: 3,881.37  +4.87       2/23

DJ: 31,961.86  +424.51      NAS: 13,597.97  +132.77     S&P: 3,925.43  +44.06     2/24

NEW YORK (Reuters) - Shares on Wall Street ended higher on Wednesday, as a selloff in technology-related stocks eased and a rotation into cyclical shares continued after Federal Reserve Chair Jerome Powell’s comments calmed inflation worries.  The Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed up. The Dow hit a record high earlier in the session.  GameStop Corp stock, which was at the center of volatile moves in late January by shares talked about on a Reddit forum, more than doubled with no obvious catalyst. Volume was more than two times the 10-day moving average.  Powell told lawmakers on Wednesday it may take more than three years to reach the central bank’s inflation goals, a sign the Fed plans leave interest rates unchanged for a long time to come.

“What’s driving the stock market is the fiscal stimulus, the dovish Fed, the real strong, strong earnings that we’re seeing, as well as the fact that we’re going to have a third vaccine,” said Richard Saperstein, chief investment officer at Treasury Partners.  The U.S. Food and Drug Administration said on Wednesday Johnson & Johnson’s one-dose COVID-19 vaccine appeared safe and effective in trials, paving the way for its approval for emergency use as soon as this week.  Johnson & Johnson rose 1.3% following the news.

The Dow Jones Industrial Average closed up 424.51 points, or 1.35%, to 31,961.86, the S&P 500 gained 44.06 points, or 1.14%, to 3,925.43 and the Nasdaq Composite added 132.77 points, or 0.99%, to 13,597.97. All three main indexes were on track to post strong monthly gains, with the Dow and the S&P 500 set for their best month since November.

Investors have focused on rising U.S. yields and their potential impact on growth stocks. Saperstein said higher yields could pressure stocks but would not derail the upward trend.  “I don’t believe that the 10-year yield going from 1% to 1.5% is going to alter the calculus of owning large technology stocks,” said Saperstein.  Value-oriented stocks have enjoyed a bit of a bounce recently, and the S&P 500 Value index rose for a fourth straight day.

The S&P 500 financial sector hit an all-time peak, while other cyclical stocks including industrials, energy and materials also rose.  The S&P 500 Growth index, which includes most of the high-flying technology-related stocks, has come under pressure in the last few days due to valuation concerns, elevated Treasury yields and an investment shift into more economy-sensitive parts of the market.

Microsoft Corp, Amazon.com Inc and Apple Inc were down 0.4% to 1.1%, while Facebook, Netflix Inc and Alphabet Inc reversed earlier declines.  Growth-oriented stocks are particularly sensitive to rising yields as their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.  Tesla Inc gained 6.2% after star investor Cathie Wood’s Ark Invest fund bought a further $171 million worth of the company’s shares in the wake of a sharp fall in the electric-car maker’s stock.  Lowe’s Cos Inc slid 3.7% as it stuck by its 2021 outlook of a $4 billion to $8 billion drop in revenue, even after reporting blow-out fourth quarter results.

Advancing issues outnumbered declining ones on the NYSE by a 2.10-to-1 ratio; on Nasdaq, a 2.62-to-1 ratio favored advancers.  The S&P 500 posted 102 new 52-week highs and no new lows; the Nasdaq Composite recorded 282 new highs and seven new lows.

Volume on U.S. exchanges was 13.68 billion shares, compared with the 16.01 billion average for the full session over the last 20 trading days.