U.S. stocks rose again on Tuesday as Wall Street appeared to find its footing after a rocky start to the new year.
The tech-heavy Nasdaq Composite gained 0.9%, building on an afternoon rally from the previous session that snapped a four-day losing streak. The S&P 500 rose 0.4%, while the Dow Jones Industrial Average added 37 points, or 0.1%.
Stocks have been volatile to start the year, as rising interest rates have put pressure on equities. However, interest rates cooled on Tuesday, with the 10-year Treasury yield slipping to 1.76%.
“The market is grappling with a broad-based rotation and the potential for a hastened pace of rate hikes, which is leading to volatility,” Greg Marcus, managing director at UBS Private Wealth Management, said in a note.
Large tech stocks helped support the broader market, with Amazon rising 2.5% and shares of Apple and Nvidia gaining roughly 1% each. Other notable gainers included Illumina, which rose 12% after the genomic sequencing company issued a 2022 revenue outlook that was ahead of consensus.
Shares of IBM, which was downgraded to sell by UBS, fell nearly 3% and weighed on the Dow.
Fed Chair Jerome Powell testified before a Senate committee on Tuesday as part of his re-confirmation process. Powell said that he expected a normalized supply chain to help ease inflation pressures in 2022 but said the Fed would not be afraid to hike rates further than projected if inflation remains high.
“If we have to raise interest rates more over time, we will. We will use our tools to get inflation back,” Powell said.
However, stocks and bonds both moved higher during Powell’s testimony as he did not announce an accelerated change in policy from what the central bank had already signaled.
“Powell noted that the balance sheet runoff will occur later in 2022 and that ‘it’s a long road back to normal’. On net, the Chair’s comments are consistent with a willingness to deliver the liftoff hike in March assuming there isn’t a dramatic reversal in the pace of consumer price gains,” Ian Lyngen of BMO said in a note to clients.
Tuesday’s market moves follow a sharp rally on Monday afternoon, which saw the Nasdaq erase a 2.7% loss to finish slightly higher and snap a four-day losing streak.
Jim Paulsen, chief investment strategist at the Leuthold Group, said that while the stock market is likely to encounter a correction this year – and last week’s action could perhaps have been the start of one – it will be met by strong company fundamentals.
“Historically, the stock market has suffered some nasty ‘temper tantrums,’ and numerous rate hikes eventually led to recessionary bear markets,” Paulsen said in a note Monday evening. “However, the current focus among investors may be misplaced. The stock market’s response may have less to do with the timing and number of rate hikes than it does with the ‘direction’ of real earnings.”
Earnings season will be in full swing by the end of this week with the big banks set to report starting Friday. Grocery chain Albertson’s reported results that beat expectations on the top and bottom lines on Tuesday morning.
U.S. stocks were slightly higher on Tuesday after testimony from Fed Chair Jerome Powell.