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S&P 500 Rides Tech, Energy Rally as Powell Soothes Tightening Fears

Stock MarketsJan 11, 2022 04:59PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 climbed Tuesday, led by energy and tech after U.S. bond yields fell following as less hawkish-than-expected from Federal Reserve Chairman Jerome Powell calmed fears of aggressive Fed policy tightening. 

The S&P 500 rose 0.9%, the Dow Jones Industrial Average gained 0.5%, or 183 points, the Nasdaq added 1.4%.

Powell confirmed the Fed plans to begin normalizing policy including ending bond purchases, hiking rates, and letting bonds on its balance sheet mature later this year.

“I would expect that this year 2022 will be the year in which we take steps toward normalization [of monetary policy],” Powell said.

That would involve “ending asset purchases in March, raising rates over the course of the year  … and “perhaps later this year, we will start to allow the balance sheet to run off.”

Surging Treasury yields, which had weighed on growth sectors of the market like tech, took a breather, supported the rebound in tech pushing the broader market higher.

Meta Platforms (NASDAQ:FB), formerly know as Facebook, Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), which make up about a quarter of the S&P 500.

The recent pullback in tech was linked to “the fear of a Fed being more hawkish and more aggressive in its policies going forward … but Powell calmed the markets in his hearing,”  Darren Schuringa, CEO of ASYMmetric ETFs said in an interview with Investing.com on Tuesday.

“The most powerful lever the Fed has to pull on right now is starting to shrink its balance sheet by selling bonds,” Schuringa added. "But Powell backed away from that, saying we're going to let our balance sheet roll off … that’s not as disruptive in the market as selling bonds." 

Semiconductors continued to pare recent losses, up nearly 2%, following a 5% jump in Advanced Micro Devices (NASDAQ:AMD) after KeyBanc upgraded its rating on the stock to overweight from sector weight, citing cloud data center growth in 2022.

Energy was also among the top gainers on the day, as oil prices moved higher on expectations that the demand impact from the omicron impact may not be as severe as initially feared.

Occidental Petroleum (NYSE:OXY), Hess (NYSE:HES) and APA (NASDAQ:APA), led the energy sector move higher, with the latter up more than 8%.

In a potential sign of renewed appetite for risk assets, defensive corners of the market such as utilities and consumer staples were on the back foot.

The rally in the broader market comes a day ahead of the inflation report due Wednesday, the U.S. is expected to report its fastest pace of inflation since 1982. 

"The risk to the market is to the downside ahead of inflation report because I think the probability is CPI comes in hotter than expected, according to Schuringa. "If inflation is much hotter,  there's going to be [renewed] pressure for the Fed to act."

S&P 500 Rides Tech, Energy Rally as Powell Soothes Tightening Fears
 

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Comments (17)
TJ Theodore
TJ Theodore Jan 11, 2022 9:19PM ET
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Ahh. Ive got it. So everything is ok, until we see the CPI report in the morning
Sean Livingstone
Sean Livingstone Jan 11, 2022 9:13PM ET
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Inflation is great for corporate earnings. Just like job cut is good for corporations too. Which is why China stocks plummeted last year.
Kochar Bipin
Kochar Bipin Jan 11, 2022 7:13PM ET
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For over a decade, there has been under-investment in the oil, coal and metals sector leading to the current supply shortage which has led to the current surge. Biden should hence take immediate steps to boost shale oil production by providing tax breaks on fresh investment in this sector
Karl Kessler
Karl Kessler Jan 11, 2022 7:13PM ET
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Tight oil production has peaked and run its course. It served its purpose, but is now throwing good money after bad. It never made a profit, but what it did do was lower oil prices for a time. No question that energy investment has been way too low, but so has research. Unless we get some real breakthroughs in new forms of energy, winter, as they say, is coming.
New Jazenevd
New Jazenevd Jan 11, 2022 7:13PM ET
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Do not count on Biden doing anything good for US oil industry or any other US industry. His policies are good for China industries.
Chris Hall
Chris Hall Jan 11, 2022 7:13PM ET
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cant talk about clean energy to someone who promotes oil! just like you cant talk facts of climate change. Truth falls on deaf ears
Jason Lebron
Jason Lebron Jan 11, 2022 6:35PM ET
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The main topic should be "how to deflate Financials & Energy stocks". XLF & XLE are bubbled up the most and so is the materials sector.
New Jazenevd
New Jazenevd Jan 11, 2022 6:35PM ET
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Materials sector is supposed to perform better when inflation is high.
Erich Lampman
Erich Lampman Jan 11, 2022 6:35PM ET
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Haha seriously? Oil isnt bubbled. Its rhe result of a President shuttering pipelines and ceasing fracking on American soil
Jalal Ud Din
Jalal Ud Din Jan 11, 2022 5:37PM ET
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inflation is taking away bargaining power from US and Canadian residents already - not sure if announcement of inflation may play further role. However, it will bring down inflated stock prices
New Jazenevd
New Jazenevd Jan 11, 2022 5:37PM ET
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Inflation will push stock prices higher.
New Jazenevd
New Jazenevd Jan 11, 2022 5:29PM ET
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Powell better come up with new, tenderly sounding, word for inflation when it goes to double digits. Doing something more serious becomes very questionable.
jj mm
jj mm Jan 11, 2022 5:27PM ET
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USA will never ever be capable of paying this debt. what a mess for the next chairman oh my God!!
Scott Keever
Scott Keever Jan 11, 2022 5:27PM ET
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No country has ever paid off its debt. print money 2 Infinity and collapse the system debt goes away and start over with new system. That is the plan regardless Who's the chairman.
Ronald Warren
Ronald Warren Jan 11, 2022 5:27PM ET
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You're absolutely right. It's already in play! "Fedcoin", a digital currency is set to replace the dollar, at which time, federal debt will be absolved. Of course you and I will still have to pay ours. Just a matter of time!
Farting Joe
Farting Joe Jan 11, 2022 5:27PM ET
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corrupted fed and senil toy
Jack Romanum
Jack Romanum Jan 11, 2022 5:20PM ET
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I don't think anyone believes Powell anymore. The pumping of the inflation bubble continues, everyone can see it.
durmus aydin
durmus aydin Jan 11, 2022 5:17PM ET
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wall street maid
Mohammed Alhajri
Mohammed Alhajri Jan 11, 2022 5:14PM ET
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Ok, got it
durmus aydin
durmus aydin Jan 11, 2022 5:13PM ET
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Powell is leaving the Fed chair as a market speculator. What he does best!..he transferred to wall street.
Mitchel Pioneer
Mitchel Pioneer Jan 11, 2022 5:05PM ET
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Greatest financial fraud in history, and biggest investment joke in the world.
Cathy Bartlett
Cathy Bartlett Jan 11, 2022 4:50PM ET
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The Fiat bubble will continue until it collapses. If the illusionists start raising interest the Fiat bubble will burst because the external/internal debt will raise as well and by default will escalate the price of interest payments. House of Fiat cards is crumbling...
Mr George
Mr George Jan 11, 2022 4:43PM ET
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In the beginning of the session Investing sent a message saying something like "Big sell off due to interest rates, inflation, fears"... and then quickly removed it. Not a good initiative to send these quick unreasonable messages in the beginning of the sessions.
Mario tragik
Mario tragik Jan 11, 2022 4:43PM ET
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omg this is criminal where are the athorities???!! This is worse than a ponzi scam.
Matt Kay
Matt Kay Jan 11, 2022 4:36PM ET
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So the plan is to keep the bubble going for as long as possible? Got it.
Tyler Phillis
Tyler Phillis Jan 11, 2022 4:36PM ET
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Lol…what bubble?
Kapil Baldawa
Kapil Baldawa Jan 11, 2022 4:32PM ET
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No matter what, US of A can't live without debt n it's clear that all the talk of controlling inflation etc means nothing.. these guys will never give up on debt.. mkts will never be free again.. until the US debt is downgraded to what it is.. JUNK
Mohammed Alhajri
Mohammed Alhajri Jan 11, 2022 4:32PM ET
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The monetary system is based on debt no debt no monetary system.
 
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