Wall Street bounces as Powell's testimony brings some relief

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 10, 2022. REUTERS/Brendan McDermid

By Bansari Mayur Kamdar, Shreyashi Sanyal and Sinéad Carew

(Reuters) - U.S. stock indexes were gaining ground on Tuesday with Nasdaq leading the advance as investors appeared relieved that Federal Reserve Chair Jerome Powell's testimony to Congress did not include any major surprises.

Federal Reserve Chair Jerome Powell, in a congressional hearing that pointed to his likely confirmation for a second term as head of the U.S. central bank, said the economy should weather the current COVID-19 surge with only "short-lived" impacts and was ready for the start of tighter monetary policy.

After falling just under 1% earlier in the session, the interest rate sensitive technology sector bounced back to rally almost 1% and provide the S&P its biggest boost.

"The market is extremely in tune to the Treasury yield move right now. As yields have started to slow down their ascent that's providing support for technology related stocks," said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. "There weren't any real surprises to Powell's comments which perhaps is adding some stability."

While Miskin saw some signs of a risk-on market on Tuesday he said investors were also "tiptoeing around" as they waited for key inflation data, which is due out on Wednesday.

The headline Consumer Price index (CPI), expected to come in at a red-hot 7% on a year-on-year basis, is expected to influence the Fed's plans for interest rate hikes.

By 2:04PM ET, the Dow Jones Industrial Average rose 87.82 points, or 0.24%, to 36,156.69, the S&P 500 gained 29.38 points, or 0.63%, to 4,699.67 and the Nasdaq Composite added 185.87 points, or 1.24%, to 15,128.70.

The S&P 500 index was on course to break a five-day slump, while the Nasdaq was looking to add to its tiny gain on Monday, when it staged a wild late day comeback that strategists attributed to an influx of retail investors hunting for bargains after an early session sell-off.

Equity markets have been battered since the start of this year after the minutes from the Fed's December meeting pointed to a sooner-than-expected rise in interest rates due to rising inflationary pressures.

Marko Kolanovic, chief global markets strategist at JPMorgan Chase & Co (NYSE:JPM), on Monday issued a research note calling the recent pull-back in riskier assets "arguably overdone" and calling it a buying opportunity. [nL1N2TQ2DY

Eight of the 11 major S&P 500 sectors rose, with growth-heavy sectors like technology and consumer discretionary contributing most to the S&P's gains. The biggest percentage gainer was energy, which rose along with crude oil futures. (OR)

Megacap growth companies, including Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN), were the biggest single-stock boosts to the S&P 500.

Also on investor watchlists for this week is the unofficial start of the fourth-quarter earnings season on Friday, with big banks expected to show an uptick in quarterly core revenue thanks to new lending and firming Treasury yields.

International Business Machines (NYSE:IBM) was down 2.7% after UBS downgraded the stock to "sell" and slashed its price target.

Vaccine maker Moderna (NASDAQ:MRNA) was down 4.7% after rising more than 9% on Monday. Pfizer (NYSE:PFE)'s vaccine partner BioNTech was also down 4.6% on Tuesday. The World Health Organization said more research is needed to find out if existing COVID-19 vaccines provide adequate protection against the Omicron variant.

Casino operator Las Vegas Sands (NYSE:LVS) Corp was up almost 8% after J.P. Morgan upgraded the stock to a "overweight" rating.

Advancing issues outnumbered declining ones on the NYSE by a 2.76-to-1 ratio; on Nasdaq, a 2.13-to-1 ratio favored advancers.

The S&P 500 posted 21 new 52-week highs and no new lows; the Nasdaq Composite recorded 29 new highs and 99 new lows.