Stocks turned sharply lower on Wall Street on Thursday (US time) as bond yields made another upward spike following a speech by Fed chief Jerome Powell, renewing pressure on high-flying technology stocks.
The S&P 500 was down 1.4 per cent in late trade, giving up an early gain, and the tech-heavy Nasdaq pulled back 2.1 per cent. The Dow Jones Industrial Average is 1.4 per cent lower. Small-company stocks fell even more.
Wall Street is falling in afternoon trade.Credit:Bloomberg
Wall Street’s fear gauge touched a near one-week high at 28.16 points.
The Nasdaq wiped out all of its year-to-date gains and was down about 10 per cent from its record closing high on February 12. If it closes at these levels, it would confirm the Nasdaq is in a correction.
It sets up the ASX to edge lower, with futures at 6.45am AEDT pointing to a fall of 10 points, or 0.2 per cent, at the open.
The Wall Street losses came as the yield on the 10-year Treasury rose sharply during a question-and-answer session with Powell during which he said inflation will likely pick up in the coming months but the increase will be temporary, and won’t be enough for the Fed to alter its low-interest rate policies.
As the economy reopens this US spring and summer, and vaccines are distributed and the coronavirus retreats, many economists expect a spending boom that will stretch available supplies of goods and services. That will likely push up prices, Powell said.
Price drops that occurred about a year ago when the pandemic began will drop out of the year-over-year calculations soon, which could also temporarily lift inflation.
Powell also gave no hint that the Fed would take steps to keep longer-term interest rates in check, such as by shifting some of its $US80 billion ($103.5 billion) in monthly Treasury purchases to longer-term securities.
