The S&P 500 and Dow Jones Industrial Average rose for the first time in days, led by a rebound in shares of technology companies, as Federal Reserve Chairman Jerome Powell reiterated the central bank’s efforts to corral inflation.
Stocks opened lower and dipped further as senators peppered Mr. Powell with questions during his reconfirmation hearing for a second term as Fed chair. Indexes later recovered.
The S&P 500 added 42.78 points, or 0.9%, to 4713.07, snapping a five-day losing streak. The Nasdaq Composite added 210.62 points, or 1.4%, to 15153.45, building on Monday’s midday turnaround. The Dow Jones Industrial Average advanced 183.15 points, or 0.5%, to 36252.02, its first gain in five days.
During the hearing, Mr. Powell said the central bank plans to move as aggressively as needed to cool inflation. “If we have to raise interest rates more over time, we will,” he told lawmakers.
The bank has made no decisions about shrinking its balance sheet, he added, saying also that “it’s a long road to normal” for monetary policy.
Stocks have been volatile as the prospect of imminent and faster-than-expected interest-rate rises has convulsed financial markets this month. Mr. Powell on Tuesday played up the central bank’s role in taming inflation, while reiterating that interest rates are likely to remain at historically low levels.
He added that he was optimistic that supply-chain bottlenecks would ease this year to help bring down inflation. Analysts said the comments gave investors their clearest indication yet of how the Fed plans to start normalizing monetary policy in the coming months, while cooling concerns around whether the central bank would aggressively raise rates.
For some investors, the comments signaled a buying opportunity for stocks that had been beaten down in recent sessions.
“We view the recent equity volatility as an adjustment to the Fed’s incrementally more-hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” said Mark Haefele, chief investment officer of global wealth management at UBS Group, in a note to clients Tuesday.
He added that stocks historically perform well in the months leading up to the first rate increase of a cycle. Since 1983, Mr. Haefele said, the S&P 500 has risen an average of 5.3% in the three months before the first Fed rate increase, followed by an average of 5.3% over the next six months.
Still, some investors remained jittery as the rate increases will likely coincide with a slowdown in economic growth. “There is more of a risk now that rate rises are going to coincide with falling growth, and that is obviously a bad combination,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe.
During the hearing, investors bought the dip on tech and other growth stocks. The tech and communication services sectors of the S&P 500 both rose at least 1% after trading in the red earlier in the session. Consumer discretionary stocks added 0.4%.
Energy stocks climbed 3.4%, coinciding with Brent crude prices hitting their highest settlement value since early November.
Other stocks making big individual moves included Illumina, which added $61.52, or 17%, to $423.80 after posting earnings late Monday that beat analysts’ expectations. Shares of Rivian Automotive added $2.11, or 2.6%, to $83.55, recouping some of the more-than-5% drop Monday when The Wall Street Journal reported that the electric-truck maker’s chief operating officer had departed.
A rally in government bond yields halted a day after the 10-year Treasury yield settled at a 52-week high. The yield on the benchmark bond edged down to 1.745% Tuesday from 1.779% Monday, its largest one-day decline since mid-December.
Investors also are gearing up for the start of earnings season this week. The reports will be particularly important for technology firms that will need to post strong growth to justify their valuations, said Mr. Kassam.
Results more broadly will need to be robust to support U.S. stocks, which are increasingly looking less attractive than their European counterparts, he added.
“For the U.S. to keep its top-of-the-world stance, it needs across-the-board earnings to come in strong,” he said.
Overseas, the Stoxx Europe 600 rose 0.8%, led by gains for its tech sector. In Asia, stock markets were mostly lower. Japan’s Nikkei 225 fell 0.9%, while Hong Kong’s Hang Seng Index was flat. In mainland China, the Shanghai Composite Index dropped 0.7%.
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