U.S. stocks edged higher Tuesday, suggesting markets will take a breather after a bout of volatility in both shares and bonds.
The S&P 500 was flat in early trading after it surged on Monday in its best day since June. The Nasdaq Composite Index was down less than 0.1%, while the Dow Jones Industrial Average ticked 0.1% higher.
Investors say their focus is squarely on central bank officials for cues on how monetary policy may shift down the road. That will determine their appetite for government bonds and for inflation-adjusted returns. A flood of easy money by the Federal Reserve since the pandemic hit last spring has helped subdue returns on bonds and fueled a rally in stock markets for much of the past year.
This phenomenon seemed to halt in recent weeks: money managers adjusted their portfolios in anticipation of an economic rebound and a potential increase in inflation, prompting a selloff in government bonds. Yields jumped last week as bond prices fell, leading to jitters in stocks. Bond markets have since stabilized, and stocks surged higher on Monday.
“We’re just taking a breather after yesterday,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.
