Stocks slump as Powell signals Fed tapering may speed up

Yahoo Finance's Jared Blikre breaks down how Fed Chair Powell's testimony before Congress is affecting the stock and bond markets.

Video Transcript

- Let's turn our attention to the market moves. Now, as we said, the Dow coming off of the session lows but down nearly 600 points right now. The NASDAQ down 262 and the S&P 500 down about 75 points. Let's bring in Yahoo Finance's Jared Blikre who's tracking the market action today. And, Jared, it feels like, kind of, like what we saw on Friday, a bit of a bounce back happening yesterday, but a lot of these not just on the testimony of the Fed Chair but also some comments that we got from Moderna CEO Stephane Bancel in a "Financial Times" interview about the potential for his vaccine not to be able to stand up to this new variant and provide the kind of immunity it has with some of these other COVID variants.

JARED BLIKRE: Yeah, Akiko, I think that highlights the fact that we have two competing narratives here. One has to do with the Omicron variant that has sprung up and we have very precious little information about it. We're not going to know that for a couple of weeks. We've been talking about that.

But, on the other hand, we have Fed-- we have the Fed and Powell who are scared of inflation. And I agree with Brian Cheung. I think this is-- and Evercore for that matter-- I think this is a new tone. And why would he bringing up the acceleration of the taper if it were not probably going to happen?

Now, if something drastic were to happen with Omicron, then we could see the Fed change its taper plans and go back to the original. But I think today is, kind of, a game changer and we are seeing that play out in the markets, not just equities, but importantly bonds.

So let's go to the YFi Interactive. And I'm going to begin with the day's price action here. This is the S&P 500. And I tweeted this earlier on that decline that you see. And basically Powell said we can consider wrapping up taper a few months sooner-- that was a game changer-- and then we'll use our tools to stop entrenched higher inflation. And here is what the market was doing at the time. And just take a look at what happened. The market actually hit greater session lows-- lower session lows after that.

But the real action, as I said, was in the bond market. I'm going to pull up a year-to-date chart of the five-year T-note yield. And let me put this to a line chart. And you can see still in the upper end of its range here. But you take a look at where the 10-year is it's a little bit lower relative to where it was earlier in the year, 30-year lower relative to where it was earlier in the year. In fact, this is the lowest level since, I believe, January. You combine that with a strengthening dollar and it is causing rejiggering of portfolios and, kind of, a mad scramble.

I want to take a look at some heat maps. I'm going to begin with these sector action. And we can see a lot of red here. But let's do a month-to-date chart just so I can highlight exactly what is going on. You see some green, you see some red, this has caused massive consternation for portfolio managers. And the risk to the downside now is accelerating. Guys.

- All right, Jared. Thanks so much for--

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