Stocks, bonds slump on Fed chairman’s remarks

U.S. stocks sold off for the first time in three sessions and Treasurys slumped as investors weighed the potential for added interest rate hikes this year following Federal Reserve Chairman Jerome Powell’s assessment that the economy is strengthening and inflation could be gaining speed. The dollar advanced.

All major equity gauges finished lower. Shares of media companies led the way down following Comcast’s $31 billion proposal to buy Sky Plc, which could set off a bidding war with Walt Disney and 21st Century Fox. Automakers and real estate developers also struggled.

Powell’s testimony raised the possibility that the Fed could rethink its plan for three interest rate hikes this year and potentially add a fourth. The 10-year Treasury yield initially spiked on Powell’s seemingly hawkish tone before drifting back below 2.9 percent.

“The markets are skittish,” said Barry James, president and portfolio manager at James Investment Research in Xenia, Ohio. “People are maybe a little bit oversensitive right now.”

The pace of U.S. monetary policy tightening remains a hot debate on Wall Street, and traders have been betting that Powell won’t seek to shock financial markets by moving toward a more hawkish monetary policy.

The S&P 500 index plunged 1.3 percent to 2,744.27, its biggest decline in more than two weeks. The Dow Jones industrial average fell 299.24 to close at 25,410.03, a loss of about 1.2 percent.

The Nasdaq Composite index dropped 1.2 percent, falling 91.11 to 7,330.35. The small cap-dominated Russell 2000 index fell almost 1.5 percent, closing at 1,536,47, down 22.86.

The yield on 10-year Treasurys rose three basis points to 2.89 percent.