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U.S. Stocks Fall Sharply As Powell Comments Trigger Spike In Bond Yields

wallstreet1 061318 04mar21 lt

Stocks have seen substantial volatility over the course of the trading session on Thursday, with the major averages showing wild swings as the day has progressed. Recently, the major averages have shown a significant move to the downside.

Currently, the major averages are falling to new lows for the session. The Dow is down 415.79 points or 1.3 percent at 30,854.30, the Nasdaq is down 298.08 points or 2.3 percent at 12,699.67 and the S&P 500 is down 53.91 points or 1.4 percent to 3,765.81.

The recent sell-off on Wall Street comes as bond yields have spiked in reaction to remarks by Federal Reserve Chair Jerome Powell.

The yield on the benchmark ten-year note has jumped back above 1.5 percent but currently remains below last Thursday's intraday high above 1.6 percent.

Speaking during The Wall Street Journal Jobs Summit, Powell acknowledged the reopening of the economy could "create some upward pressure on prices."

However, Powell suggested the increase in the annual rate of inflation would largely reflect comparisons to the low prices seen a year ago.

The Fed chief said he expects the increase in inflation to be "transitory" and stressed there is "a lot of ground to cover" before price growth reaches a sustainable level above the Fed's 2 percent target.

Powell said the recent spike in bond yields has "caught my attention" and would be "concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals."

Traders have kept a close eye on activity in the bond markets in recent sessions, as the jumps in yields has raised concerns about inflation and the outlook for interest rates.

On the economic front, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended February 27th.

The report said initial jobless claims inched up to 745,000, an increase of 9,000 from the previous week's revised level of 736,000.

Economists had expected jobless claims to rise to 750,000 from the 730,000 originally reported for the previous week.

A separate report released by the Commerce Department showed a bigger than expected increase in new orders for U.S. manufactured goods in the month of January.

Sector News

Airline stocks have moved sharply lower over the course of the trading session, resulting in a 6.3 percent nosedive by the NYSE Arca Airline Index.

Reflecting the weakness in the broader tech sector, computer hardware stocks have also show a substantial move to the downside. The NYSE Arca Computer Hardware Index has plunged by 4.8 percent to a one-month intraday low.

Considerable weakness has also emerged among steel stocks, as reflected by the 4.2 percent slump by the NYSE Arca Steel Index. The index is pulling back off its best closing level in almost nine years.

Transportation, brokerage and biotechnology stocks are also seeing significant weakness, while energy stocks have rallied along with the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Thursday. Japan's Nikkei 225 Index and China's Shanghai Composite Index both tumbled by 2.1 percent.

European stocks also moved to the downside on the day. The U.K.'s FTSE 100 Index fell by 0.4 percent and the German DAX Index dipped by 0.2 percent, while the French CAC 40 Index ended the day nearly unchanged.

In the bond market, treasuries have moved sharply lower in reaction to Powell's remarks. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.8 basis points at 1.538 percent.

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