Powell on Tuesday sought to reassure investors, saying the central bank will watch a broad set of job market data to assess the economic recovery from COVID-19, rather than rush to raise rates on the basis of fear of inflation.
The Nasdaq Composite rose 0.16% by (2:25 p.m. EDT (1825 GMT), after touching a high of 14,317.662. The Dow Jones Industrial Average fell 0.06% in choppy trading and the S&P 500 gained 0.06%.
Powell backing away from last week's more hawkish sentiments made people feel good about the market, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"The gains are being led not by recovery stocks, but by giant tech companies."
Flash U.S. manufacturing PMI climbed to a record high in June, supporting Wall Street shares. But manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.
Sales of new U.S. single-family homes fell to a one-year low in May, likely hindered by expensive raw materials such as lumber, which are boosting the prices of newly built homes.
"The biggest debate in the market is if inflation is transitory or permanent," said JJ Kinahan, chief market strategist with TD Ameritrade. "I would expect this pattern of trading without great conviction to continue with quick adjustments until earnings start."
Powell's comments helped the yield on benchmark 10-year U.S. Treasuries go lower, put the brakes on a rising U.S. dollar and lifted gold prices.
The 10-year U.S. Treasury yield was at 1.4869%. The U.S. dollar edged higher, reversing earlier losses but was well off last week's multi-month highs. The euro retreated 0.05%.
The MSCI world equity index <.MIWD00000PUS> rose 0.1%, continuing to climb from the one-month low it hit in the aftermath of the Fed's meeting.
The STOXX 600 was 0.73% lower on the day.
"The market's still digesting the Fed news," said Mo Kazmi, portfolio manager and macro strategist at UBP.
"I think a lot of that move was exacerbated by stretched positioning and now what we're seeing is perhaps reflation trades being put back on and the market normalising to some extent, realising that for now it's just a subtle shift from the Fed."
Early PMI data showed that euro zone business growth accelerated at its fastest pace in 15 years in June as the easing of more lockdown measures and the unleashing of pent-up demand drove a boom in the bloc's dominant services industry.
Germany's private sector growth was also lifted to its highest level in more than a decade in June, the PMI survey showed. In France, business activity edged higher, but not as much as expected.
In Britain, growth in the private sector cooled slightly from the all-time high hit in May, but inflation pressures faced by firms hit record levels. The Bank of England meets on Thursday.
Berenberg economists Holger Schmieding and Kallum Pickering wrote in a note to clients that the euro zone economy is likely to recover to its pre-pandemic level of GDP in Q4 2021, while for Britain it will be Q1 2022.
UBP's Kazmi said that he is positioned for higher yields in Europe, as it overtakes the United States in terms of vaccinations, lockdown easing and economic recovery from COVID-19.
"It will be interesting to see if the German Bund can follow the U.S. rate move with yields moving higher in Europe - it is something that we think could happen," he said.
"The fact that the Fed has moved more hawkishly will allow the ECB to be more comfortable perhaps in moving more hawkish, or less dovish, over time."
Germany's benchmark Bund yield traded at -0.176% .
Oil prices jumped to their highest in more than two years after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America. [O/R]
"The dollar is part of it, and also we're all starting to drive more," Tuz said. A weaker dollar tends to give dollar-traded commodities a boost, making them less expensive to holders of other currencies.
Brent crude futures were up 0.41%, at $75.12 a barrel and U.S. crude was gained 0.19% to $72.99.
The rising oil prices bolstered the Colombian peso's move away from seven-week lows.
Elsewhere in commodities, spot gold prices rose 0.11% to $1,780.51 an ounce and gold futures settled up 0.3% at $1,783.40, buoyed by Powell's reassurances. Still, bullion was far from reclaiming losses seen during last week's 6% slump. [GOL/]
Bitcoin was up around 2.6% on the day, giving back some of the day's steeper gains. The cryptocurrency dropped to as low as $28,600 on Tuesday - its lowest since January. Ether was trading at $1,964.18 .
(Reporting by Chris Prentice and Elizabeth Howcroft; Editing by Emelia Sithole-Matarise, Angus MacSwan, Jonathan Oatis and Jane Merriman)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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