U.S. stocks edged lower Tuesday ahead of testimony by Federal Reserve Chairman Jerome Powell, who plans to say that the U.S. economy’s recovery remains far from complete.
The S&P 500 ticked down 0.2%, a modest pullback for the broad market index after the opening bell. The Nasdaq Composite Index was 0.2% lower, while the Dow Jones Industrial Average edged down 0.3%, or 98 points.
Mr. Powell plans to reiterate in a hearing before Congress that the central bank will continue providing support to the economy through loose monetary policy. He and Treasury Secretary Janet Yellen will begin two days of testimony at 12 p.m. ET. But optimism about the speed of the recovery and the possibility of rising inflation have left investors skeptical about the Fed’s plans for interest rates and bond purchases.
Investors are also reassessing their expectations for a fast and widespread global recovery, which had led to rising bets earlier this year that companies sensitive to an economic recovery would benefit. Rising Covid-19 cases in Europe and recent extensions to lockdowns in Germany, France and Italy are also weighing on sentiment.
“It feels like the reflation theme is running into a few roadblocks,” said Sebastian Mackay, a multiasset fund manager at Invesco. “We are probably in a cyclical recovery, but we may have gotten ahead of ourselves. This is a pause for thought: how rapid is this recovery actually going to be?”
