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Stocks face early pressure after a rotation from growth stocks to value sectors continued in the US.

The Nasdaq Composite tumbled for a second night before trimming its loss as Federal Reserve Chair Jerome Powell soothed fears policy will change to contain rising inflation any time soon. The S&P 500 and Dow turned positive in the wake of his remarks.

ASX futures eased 25 points or 0.37 per cent, signalling a weak start. Iron ore and gold retreated. Copper and oil inched higher. The dollar held above 79 US cents.

Wall Street

US stocks were deep underwater before Powell sparked an afternoon revival. In testimony to the Senate Banking Committee, the Fed Chair dampened fears rising bond yields would force the central bank to curtail stimulus measures prematurely.

“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said.

Inflation, he added, was “soft”. The central bank revised its strategy last year to allow inflation to average above 2 per cent for some time before it raises rates.

The Dow Jones Industrial Average, which had been down as much as 360 points, swung to a gain of 16 points or 0.05 per cent. The S&P 500 flipped a loss of 1.8 per cent to a gain of five points or 0.13 per cent.

The Nasdaq Composite had fallen hardest and had furthest to recover. The tech index closed 68 points or 0.5 per cent in the red after being down as much as 3.9 per cent.

Tech stocks came under heavy selling pressure in early action as investors fretted about companies that rely on debt to fuel future growth. US ten-year bond yields have climbed 28 basis points this month, triggering a reflation rotation from debt-burdened companies to those with more upside as the economy heals.

“As the economy reopens, rates are going to rise and that’s going to especially hit the high valuation of tech stocks, where earnings and cash flows are much farther out in the future than some of the more economically sensitive areas of the market,” Ross Mayfield, investment strategy analyst at Baird, told Reuters.

Cyclical sectors outperformed. Energy gained 1.6 per cent, materials 0.3 per cent and industrials 0.3 per cent. Financials rose 0.5 per cent. Bond surrogates advanced as US yields held roughly steady. The tech sector finished 0.25 per cent lower.  

Australian outlook

The prospects for today’s session improved considerably after Jerome Powell calmed market jitters. The Fed Chair essentially told traders to have a cup of tea, a Bex and a good lie down. Powell did not say anything particularly new or startling, but traders seemed comforted to know he still has their backs. Like a needy girl/boyfriend, sometimes the market just needs to hear their significant other say the words out loud.

The S&P/ASX 200 jumped 58 points or 0.86 per cent yesterday in a sign the local market had retraced far enough for swing traders to dip their toes. Mining stocks soared to fresh highs. Travel companies outperformed for a second day. The tech sector took a bath and may face further pressure this session.

The interim earnings season rolls on with updates today from Woolworths, Nine Entertainment, Medibank, Blackmores, Bega Cheese, Air New Zealand, Mayne Pharma, Ramsay Healthcare, Scentre Group, Perenti Global, Healius, Appen, WiseTech, InvoCare and IOOF (sources: CommSec, TradingView).   

Quarterly construction data may not sound  very sexy, but are an input to GDP calculations and therefore have the potential to affect the market mood. The numbers are due at 11.30am AEDT, along with the wage price index

The dollar held its ground overnight and was last trading unchanged at 79.14 US cents.

Commodities

Mining giants BHP and Rio Tinto rose in US trade, but failed to match yesterday’s Australian rallies. BHP’s US-listed stock advanced 1.42 per cent and its UK-listed stock 0.35 per cent. The Big Australian rallied 3.13 per cent to an all-time high on the ASX yesterday.

Rio Tinto inched up 0.11 per cent in the US after easing 0.13 per cent in the UK and gaining 1.77 per cent here yesterday.

The spot price for iron ore landed in China retreated $2.85 or 1.6 per cent to US$172.75 a tonne. Copper extended nine-year highs. March copper rose 0.9 per cent to U$4.1785 a pound.

Gold pulled back from its highest level in a week. Metal for April delivery settled $2.50 or 0.1 per cent lower at US$1,805.90 an ounce. The NYSE Arca Gold Bugs Index dropped 2.1 per cent.

A subdued night on oil markets saw the US benchmark dip three cents or less than 0.1 per cent, while the international benchmark, Brent crude, settled 13 cents or 0.2 per cent ahead at US$65.37 a barrel.

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