Technology – from shares to cryptocurrencies – dominated Wall Street trading in various ways on Tuesday, but Fed chair Jay Powell was the ‘star’ as he soothed inflation-wary investors in an appearance before US Congress late in the day.
Powell’s appearance helped the Dow end up 68.61 points to 33,945.58 — a much smaller gain than the 500 plus point surge on Monday for what was its best day since March.
The S&P 500 rose 0.5% to end the session at 4,246.44 while Nasdaq wiped earlier losses and climbed 0.8% to hit a fresh intraday record and finish at a record 14,253.27 as Powell reassured on inflation and tapering its bond buying activities.
The rise by Nasdaq came despite another volatile day for crypto, led by bitcoin which was battered down and up.
Bitcoin values swung widely, falling below $US30,000 briefly as the value of the recent wipeout for the entire sector reached an estimated $US1.3 trillion, according to various media estimates.
Bitcoin was trading slightly higher in early Asian dealings.
At one point on Tuesday, bitcoin saw all of its 2021 gains wiped out. Shares in Tesla, a high-profile bitcoin owner, rose after bouncing off its lows to end the session up nearly 0.5%.
Major technology shares led the market rally Tuesday as Netflix climbed 2.3%, while Amazon, Apple and Microsoft all gained at least 1%.
Microsoft joined Apple in the exalted (by investors) $US2 trillion club for a short while before ending at $US1.978 trillion at the close.
Facebook jumped 2%. Alphabet shares in fact rose even after the European Commission opened a long-tipped investigation into Google’s advertising unit, the core business of the entire empire.
Driving this confidence were more soothing words on inflation from Fed Chairman Jerome Powell before a US House of Representatives hearing on inflation and on the tapering of the central bank’s big bond buying program.
The Fed chief was bullish on the economic comeback and maintained that inflation forces were temporary.
“Since we last met, the economy has shown sustained improvement,” Powell said Tuesday, according to the Fed release. “Widespread vaccinations have joined unprecedented monetary and fiscal policy actions in providing strong support to the recovery.
“Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades.”
“Inflation has increased notably in recent months,” Powell said. But the Fed chief noted that most of those are a temporary effect and that inflation should settle back to 2% over the long term.
But he made it clear in an answer to a question that the Fed would not try a pre-emptive rate rise because of high inflation.
“We will not raise interest rates pre-emptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances,” he told Congress.
That saw bond yields ease with the key 10-year yield down from nearly 1.50% on Monday to 1.467% on Tuesday. The US dollar was firm which saw the Aussie dollar consolidate around 75.55 US cents.
Gold fell – down $US5 an ounce to $US1,777 at settlement. Oil also dipped by less than 1% to $US73.06 for US crude and $US74.81 for Brent (on rumours OPEC+ might cut its cap in August). Copper rose 1.3% to $US4.23 a pound.
Iron ore rebounded from Monday’s $US10 a tonne fall across each of the three categories. The price of 62% Fe fines delivered to northern China rose $US6.17 to $US214.32; 58% Fe fines rose $US6.18 to $US181.71 a tonne and 65% Fe fines from Brazil jumped $US10.20 to $US249.20 a tonne (because it is in greater demand).
And bitcoin? Another bad day after China increased its crackdown on mining and other crypto activities. More than half the world’s miners are in China and the crackdown has sent prices sliding.
Reuters said the price dropped to $US28,600, its lowest since early January. It was last up 3.7% at $US32,802, and remains about 13% higher so far this year.
“Bitcoin’s earlier fall also pressured smaller coins such as ether. It tumbled 11% on Monday, its largest one-day drop in over a month, with losses of roughly 56% since hitting an all-time high of just under $65,000 in mid-April.
“The earlier sell-off was sparked by the People’s Bank of China urging China’s largest banks and payment firms to crack down harder on cryptocurrency trading, the latest tightening of restrictions on the sector by Beijing,” Reuters reported.
Mining has been banned (except for that approved by the state, meaning government-controlled activities), banks are banned from dealing in bitcoin.
US business websites have estimated the value of the fall this year is now around $US1.3 trillion.
