U.S. markets and stock exchange traded funds pared early losses on Tuesday as a supportive Federal Reserve helped ease investor concerns.
On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.1%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 0.4%, and iShares Core S&P 500 ETF (NYSEArca: IVV) was 0.4% higher.
The early Tuesday sell-off eased after U.S. Federal Reserve Chairman Jerome Powell reassured markets that the accommodative monetary policy will still be in place, easing concerns over higher bond yields, the Wall Street Journal reports.
“The economy is a long way from our employment and inflation goals,” Powell said at a hearing of the Senate Banking Committee Tuesday morning, reiterating that the Fed will continue to support the economy with near-zero interest rates and asset purchases until signs of substantial economic progress.
The level of recovery “is likely to take some time,” Powell added.
“If you look back at (Powell’s) initial tenure, there was some ambiguity as to where the Fed stood,” Matthew Keator, managing partner in the Keator Group, a wealth management firm, told Reuters. “But over the last year, in response to the pandemic, he’s done an excellent job communicating their commitment to stable markets and full employment.”
Mega-cap growth and technology stocks have been taking a beating in recent sessions on inflation fears and rising bond yields.
The rise in bond yields “naturally does cause investors and cause markets to re-examine the view on equities,” Paul Jackson, global head of asset allocation research at Invesco, told the WSJ, pointing out that investing in government bonds is beginning to look more attractive for the first time in months.
Nevertheless, “the level at which bond yields become truly problematic for equities is a long way from where we are now,” Jackson added.
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