Stocks battle back as Fed's Powell eases inflation, economy concerns

U.S. equity markets staged a dramatic comeback Tuesday with the Dow Jones Industrial Average ending just shy of a record high after Federal Reserve Chairman Jerome Powell reassured investors the central bank would continue to support the economy and that inflation would remain in control.

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The Dow Jones Industrial Average gained 13 points, or 0.04%, erasing an earlier decline of 363 points. The S&P 500 closed up 0.13% while the Nasdaq Composite lost 0.5% trimming steep losses.

Powell told members of the Senate Banking Committee that the Fed would continue its asset purchases even as the economy improves. He also said that the recent rise in bond yields was a sign of investor optimism and not a result of inflation fears.

A recent run-up in bond yields has left investors feeling uneasy amid concerns inflation could return later this year. The benchmark 10-year yield has climbed 46 basis points this year to 1.37%. Some Wall Street strategists worry a move above 1.5% would be troublesome for the stock market.

In stocks, cyclical sectors like airlines and hotel operators that are dependent on a reopening of the economy continued their recent outperformance.

Elsewhere, Tesla Inc. shares slid into a bear market, closing 21% below their January peak. The majority of those losses have come over the past few sessions as bitcoin has sold off sharply.

Tesla earlier this month announced a $1.5 billion investment in the cryptocurrency but is still ahead on its purchases.

In earnings, Home Depot Inc. posted earnings and revenue that were ahead of Wall Street estimates but did not provide an outlook due to uncertainty surrounding COVID-19 and the impact on consumer spending.

Macy’s Inc. reported same-store sales slumped 17% from a year ago, but the retailer still managed to post its only quarterly profit in fiscal year 2020. The department store chain forecast sales in the current year that were ahead of analyst expectations.

Meanwhile, AMC Entertainment Holdings Inc. soared after New York City said movie theaters could open at 25% capacity beginning Mar. 5.

In commodities, West Texas Intermediate crude oil fell 3 cents to $61.67 per barrel and gold slid $2.60 to $1,807 an ounce.

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European markets were trading mixed with both France’s CAC 40 and Britain's FTSE 100 adding 0.21% and Germany’s DAX 30 lower by 0.61%.

In Asia, China’s Shanghai Composite slipped 0.17%, Japan’s Nikkei 225 climbed 0.46% and Hong Kong’s Hang Seng advanced 1.03%.