U.S. markets and stock exchange traded funds climbed Wednesday after Federal Reserve Chairman Jerome Powell reaffirmed his stance on keeping interest rates near zero and maintaining the central bank’s supportive bond purchasing programs.
On Wednesday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.6%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 1.3%, and iShares Core S&P 500 ETF (NYSEArca: IVV) was 1.1% higher.
Powell told lawmakers that the Fed will continue its accommodative policies for a while, warning it may take over three years to reach the central bank’s inflation goals, a signal that the central bank policymakers could look past any post-pandemic spike in prices and keep rates unchanged for a long time ahead, Reuters reports.
“The market is very concerned about inflation and the rise in interest rates. But that’s in contrast to what the Fed is saying,” King Lip, chief investment strategist at Baker Avenue Asset Management, told Reuters.
Meanwhile, value-oriented stocks picked up momentum, outperforming the growth style, as investors bet on the broad economic recovery.
“What’s happening is just a little bit of a shift out of growth and into value but today things are going slightly back to normal and you have a little bit more moving into growth as well,” David Yepez, lead equity analyst and portfolio manager at Exencial Wealth Advisors, told Reuters.
Growth-heavy names have fallen out of favor recently on valuations concerns, elevated Treasury yields, and the ongoing shift toward more economically sensitive sectors.
“There was relief in the market that yields and inflation aren’t going to be as runaway as anticipated,” Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management, told the Wall Street Journal.
Investors are beginning to look toward life beyond lockdowns.
“This really is a function of economies reopening,” Brian O’Reilly, head of market strategy at Mediolanum Investment Funds, told the WSJ. “Bond yields are rising because of good vaccination rates in the U.S. and U.K. and it’s prompting a simple rotation away from everything that did well last year, the stay-at-home stocks, to the ones that didn’t, the go-outside stocks.”
“It’s a good story in some ways, in that the market is trying to price in that economies are going to reopen,” O’Reilly added.
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