U.S. stocks fell Wednesday, reversing the prior session’s rally, as investors focused on what recent remarks by Federal Reserve Chair
mean for the trajectory of interest rates.
The S&P 500 retreated 1.2% in afternoon trading, a day after the benchmark index jumped 1.3% in a volatile session. The Dow Jones Industrial Average fell 0.6% while the Nasdaq Composite Index lost 1.7%. On Tuesday, all three indexes closed higher.
“The attention span of the market is getting shorter and shorter,” said Justin Wiggs, managing director of equity trading at Stifel Nicolaus. “It’s frustrating to investors.”
One focus for investors this week has been comments from Fed officials. Following Mr. Powell’s remarks Tuesday, Fed governor Christopher Waller said in an appearance Wednesday that the central bank will need to keep monetary policy sufficiently restrictive for a few years to tamp down inflation. He added that the quarter-percentage point increase the Fed approved last month “seems like the right size to adjust policy.”
Traders will continue to watch for any shifts in tone after last week’s stronger-than-expected jobs report, which stoked concern that the Fed could end up tightening monetary policy by more than expected.
U.S. stocks were whipsawed Tuesday after Mr. Powell’s remarks in Washington, when he reiterated that lowering inflation will be bumpy and that more interest-rate increases are on the way. Still, some investors who had braced for Mr. Powell to indicate a more aggressive interest-rate trajectory following the jobs report instead found relief in his remarks, sending indexes up to finish near session highs.
“The magic word now is ‘disinflation’—the market is becoming obsessed with this,” said Charles-Henry Monchau, chief investment officer of Geneva-based Bank Syz. Last week, Mr. Powell said that the disinflationary process has started, a sentiment he reiterated Tuesday.
Futures-market pricing indicates traders haven’t drastically shifted interest-rate expectations in recent days.
data show investors believe that the Fed will lift rates by another quarter of a percentage point in March.
Yields on Treasury bonds retreated Wednesday, in another sign of investor interest-rate expectations. The yield on the benchmark 10-year U.S. Treasury note slipped to 3.661%, from 3.673% Tuesday. The two-year yield, which is more sensitive to near-term interest-rate expectations, fell to 4.454%, from 4.469%. Yields fall when bond prices rise.
The dollar was roughly flat Wednesday, with the WSJ Dollar Index falling less than 0.1%.
In addition to Fed speakers, investors will be also monitoring another batch of earnings reports. Robinhood and Walt Disney are among the companies that will report after markets close Wednesday. Disney’s earnings represent an early test for newly reinstated Chief Executive Robert Iger.
both rose after posting results. Uber stock jumped 4.8% after it reported a rise in revenue and adjusted earnings last quarter as people spent more on rides and food delivery despite concerns about inflation.
CVS shares rose 4.3% after it agreed to acquire Oak Street Health at a valuation of about $10.6 billion, including debt, and it said its net income and revenue grew, thanks to gains in the company’s insurance and pharmacy-services businesses.
stock jumped 9%, on pace for one of its best days ever, after a report that Qatari investors could bid for the British soccer club.
In overseas trading, markets were mixed. The pan-continental Stoxx Europe 600 rose 0.3%, while most indexes in Asia finished mostly lower. China’s Shanghai Composite lost 0.5%, Hong Kong’s Hang Seng edged down 0.1% and Japan’s Nikkei 225 retreated 0.3%.
Turkey’s stock exchange suspended trading, after a steep three-day selloff triggered by back-to-back earthquakes that have killed more than 11,000 people.
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