The closed lower on Wednesday as optimism about the economic recovery by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen was unable to halt a decline in technology shares for a second straight day.
The remarks by the top two U.S. economic officials mirrored what they told Congress the day before, with Powell saying on Wednesday the most likely case is 2021 will be “a very, very strong year.”
While the three major indexes closed lower, investors sold last year’s big performers, the technology shares that doubled the index from year-ago lows, and bought the underpriced value-oriented stocks poised to do well in the recovery.
Wall Street has seesawed this week as a months-long rotation into economically sensitive energy and financial shares, which have gained on an outlook for economic growth, was briefly upended by falling bond yields that prompted beaten-down technology stocks to rise.
The yield fell to about 1.6%, a slide that in recent days had propped up tech stocks that rely on low-cost capital. Value-oriented shares on Wednesday closed flat, outpacing a 1.4% decline in growth stocks, which include tech shares.
Investors have focused on the yield on the benchmark 10-year Treasury note, pondering whether there is room for long-term interest rates to run, said David Kelly, chief global strategist at JP Morgan Asset Management. “We’re in a little bit of a lull here.
We know that the economy is primed to begin to really accelerate in the second quarter,” Kelly said. “But we haven’t seen that acceleration yet so that’s what we’re waiting for.”
Adding to an upward bias for most of the session was data showing U.S. factory activity picked up in early March amid strong growth in new orders. But supply chain disruptions continued to exert cost pressures on manufacturers, keeping inflation fears in focus.
“Everybody’s bullish about the prospects of a recovery right now,” said David Yepez, lead equity analyst and portfolio manager at Exencial Wealth Advisors. “In order for the market to bottom we need to have more fear, and I don’t feel like the market has fear right now.”