S&P 500 Holds Above 3,800 As Markets Take in Balanced Comments from Fed Chairman Powell

• The S&P 500 is lower amid a sell-off in index heavyweight momentum names like Apple and Tesla.
• However, the index remained above the 3,800 level.
• The balanced comments from Fed Chairman Powell don’t appear to have turned the dial for the market much on the day.

The S&P 500 experienced selling pressure immediately after the US stock cash open, falling to session lows not far above 3,800 at one point (meaning the index was down 1.8% at worst levels). However, falling buyers came to the rescue and have since pushed the index toward 3,950; The S&P 500 is currently trading at 3,930 and is down about 1.1% on the day.

Performance of the day

The downside in momentum stocks is the main story on Tuesday; Big tech companies like Apple (-3.67%), Amazon (-1.38%), Microsoft (-1.43%), “bubble stocks” like Tesla (-5.4%), and semiconductor manufacturers (the SOX semiconductor index fell more than 2%) are selling as momentum slows, while value stocks such as banks are doing better. Tesla is likely also suffering as a result of the decline in bitcoin, which was down more than 8% on the day and was back well below the 50,000 level again.

Given the heavy weightings of these names in the index, their downside gives the impression that the market as a whole may be performing a little worse that day than it actually is; the equally-weighted S&P 500 is down approximately 0.5% versus losses close to 1.0% in the market cap-weighted index.

Still, your downsizing risk when it comes to the equity markets; Equity investors appear a bit more nervous about valuations (which remain very high by historical standards) following recent bond market movements and amid continuing fears that inflation could surprise to the upside and Doing so triggers a monetary policy from the Fed earlier than the current tightening response.

A balanced tone to the remarks by Fed Chairman Jerome Powell on the first day of his biannual testimony before Congress does not seem to have gone too far to mitigate these concerns; the Fed chairman stuck to the usual dovish script regarding the Fed’s policy outlook, reiterating that rates will remain at the zero lower bound until the bank has reached its employment and inflation mandate and its schedule QE will not be reduced until substantial progress has been made toward these goals.

Powell was perhaps not as dovish as some had hoped when asked about the recent surge in US bond yields; He did not seem concerned about the measures, saying the measures reflected greater optimism about economic growth and inflation. However, Powell was a bit more dovish on inflation, downplaying “overheating” concerns. Powell also noted that the Fed’s current guidance is appropriate, which markets could take as a pullback against recent aggressive movements in money market prices which, as recently as Monday, placed a 70% chance that the Fed raise rates by the end of 2022 (versus the Fed’s current guidance of not raising until 2023).

On the other hand, a strong February survey of Consumer Confidence from the US Conference Board was ignored, in which the leading index rose to 91.3 against analysts’ expectations of a modest drop to 90.0. Lynn Franco, Senior Director of Economic Indicators at The Conference Board, commented that “after three months of consecutive declines in the Current Situation Index, consumers’ assessment of current conditions improved in February… (y) while the Index Expectations fell modestly in February, consumers remain cautiously optimistic, in general, about the outlook for the next few months ”.

Technical levels