Treasury yields rose Tuesday, and the Standard & Poor’s 500 index slid to its first loss in four days after the head of the Federal Reserve said that he’s feeling more optimistic about the economy.
The testimony by Fed Chairman Jerome Powell before Congress was highly anticipated, and he gave encouraging words about the economic data that have arrived in recent weeks. But some investors speculated they could mean the central bank will get more aggressive in raising interest rates than the market has prepared for.
“My personal outlook for the economy has strengthened since December,” Powell said in response to a question about whether the recently passed tax cut and other moves by Congress have changed his outlook for how quickly the Fed will raise interest rates.
The immediate reaction in the bond market was to send Treasury yields higher, and the yield on the 10-year note climbed to 2.90 percent from 2.86 percent late Monday.
Higher interest rates can hurt stock prices by making bonds more attractive. When interest rates are rising, companies need to produce bigger profits just for their stock prices to stay flat.
The S&P 500 fell 1.3 percent, to 2,744.28. The Dow Jones industrial average lost 299.24, or 1.2 percent, to 25,410.03, and the Nasdaq composite fell 1.2 percent, to 7,330.35. — AP