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Stocks trade tight ahead of Powell/Yellen Hearing; Sanctions hit China stocks, Baidu’s Hong Kong debut

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Stocks churned in the narrowly mixed territory just after Tuesday’s open, as oil prices slumped, U.S. sanctions pressured China-based stocks and markets looked toward testimony from the U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.

Dow futures rose 10 points. S&P 500 futures gained 0.04% and Nasdaq 100 futures rose 0.15%.

The Dow Jones Industrial Average lost more than 300 points, dragged down by a 3.4% drop in Caterpillar’s stock.

The S&P 500 fell 0.76% with major losses from airlines and cruise lines.

The Nasdaq Composite dropped 1.12% as Facebook, Apple, and Tesla all closed lower.

The small-cap benchmark Russell 2000 fell 3.58%, for its worst day since June.

Zoom Video (ZM) and Netflix (NFLX) topped the Nasdaq 100, up 3.2% and 2.9%, respectively.

Broadcasting heavyweight ViacomCBS (VIAC) led the early declines among S&P 500 stocks, down more than 9% after announcing a $3 billion bond offering, to be used at least partly to bolster its Paramount+ streaming unit. Discovery (DISCA) dropped more than 3%, after a 3.3% drop on Monday, threatening to snap the stock’s steep, 13-week advance.

Overseas markets traded generally lower, led by losses in China after the Biden administration on Monday imposed sanctions against two Chinese officials for human rights abuses. The European Union, Canada, and the United Kingdom simultaneously announced similar measures.

China immediately struck back at the European Union, placing sanctions on 10 EU politicians.

The news helped cool search engine giant Baidu (BIDU), which launched its Hong Kong initial offering on Tuesday. Shares in Hong Kong gained 0.8% during the session, capitalizing the company at around 700 billion in Hong Kong dollars, or $90.12 billion in U.S. currency.

Baidu’s U.S. shares dropped 5% in early trade.

China-based electric vehicle makers too were under modest pressure, with Li Auto (LI) down 3% and Xpeng (XPEV) showing a 1.8% decline.

Meanwhile, in the first joint appearance Tuesday, the pair acknowledged the richly valued asset prices in the markets but said that they are not concerned about financial stability.

“I’d say that while asset valuations are elevated by historical metrics, there’s also a belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track,” Yellen said during the testimony. “I think that in an environment where asset prices are high, that what’s important is for regulators to make sure that the financial sector is resilient and to make sure that markets work well.”

Powell said that the economic recovery from the pandemic had “progressed more quickly than generally expected and looks to be strengthening.”

However, he said that the sectors of the economy hardest-hit by the pandemic “remain weak” and the unemployment rate “underestimates the shortfall,” so the recovery still had a long way to go.

Treasury yields dipped on Tuesday with the 10-year Treasury yield hovering around 1.62%.

 

 

 

 

 

 

 

 

 

 

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