U.S. Stocks Firmly Negative After Failed Recovery Attempt

After failing to sustain a recovery attempt from an early sell-off, stocks are firmly in negative territory in early afternoon trading on Tuesday. The tech-heavy Nasdaq has shown a particularly steep drop on the day, extending the sharp decline seen in the previous session.

Currently, the major averages are off their worst levels but still posting notable losses. The Dow is down 167.75 points or 0.5 percent at 31,353.94, the Nasdaq is down 316.10 points or 2.3 percent at 13,216.95 and the S&P 500 is down 34.85 points or 0.9 percent at 3,841.65.

The early weakness on Wall Street reflected concerns about the outlook for inflation and the potential for higher interest rates due to the recent increase in bond yields.

The yields on ten-year notes and thirty-year bonds reached their highest intraday levels since the early days of the coronavirus pandemic earlier in the day.

However, selling pressure waned as traders reacted to Federal Reserve Chair Jerome Powell’s prepared remarks before the Senate Banking Committee.

Powell reiterated interest rates will remain at near-zero levels and the Fed will continue its asset purchases at the current rate until “substantial further progress” has been made toward its goals of maximum employment and price stability.

“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said.

With regard to inflation, Powell acknowledged that consumer prices have partially rebounded following the steep drop last spring but noted prices for sectors that have been most adversely affected by the pandemic remain “particularly soft.”

The Fed chief said annual inflation remains below the central bank’s 2 percent target and reiterated monetary policy is likely to remain unchanged until inflation is on track to moderately exceed 2 percent for “some time.”

On the U.S. economic front, the Conference Board released a report showing consumer confidence has improved more than expected in the month of February.

The Conference Board said its consumer confidence index rose to 91.3 in February from a downwardly revised 88.9 in January.

Economists had expected the consumer confidence index to inch up to 90.0 from the 89.3 originally reported for the previous month.

Sector News

Networking stocks are turning in some of the market’s worst performances on the day, with the NYSE Arca Networking Index plunging by 3.2 percent.

Palo Alto Networks (PANW) is posting a steep loss after reporting better than expected fiscal second quarter results but providing disappointing guidance.

Significant weakness is also visible among computer hardware stocks, as reflected by the 2.7 percent slump by the NYSE Arca Computer Hardware Index.

Gold stocks are also seeing considerable weakness after moving sharply higher in the previous session, dragging the NYSE Arca Gold Bugs Index down by 2.4 percent.

The pullback comes as the price of gold for April delivery is slipping $2.50 to $1,805.90 after skyrocketing by more than $30 an ounce on Monday.

Software, semiconductor, and oil service stocks are also seeing notable weakness, while oil producer stocks are bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday, with the Japanese markets closed for a holiday. China’s Shanghai Composite Index edged down by 0.2 percent, while Australia’s S&P/ASX 200 Index advanced by 0.9 percent.

The major European markets also finished the day mixed. While the German DAX Index fell by 0.6 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index both inched up by 0.2 percent.

In the bond market, treasuries have seen considerable volatility over the course of the session. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.362 percent.