Stocks Drop Amid Powell’s Testimony

Both Mr. Powell and Ms. Yellen said they expect a strong economic rebound this year following the vaccine rollout, but emphasized that the U.S. recovery is far from complete. Mr. Powell also said he doesn’t expect the $1.9 trillion stimulus package will lead to an unwelcome increase in inflation, but he emphasized that the central bank has tools to deal with rising price pressures if necessary.

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?”

The bond market is stabilizing, with the 10-year Treasury note yield easing down for a third straight day to 1.637%, from 1.682% on Monday. Expectations for an economic recovery have pushed bond yields higher in recent weeks, posing a challenge to tech companies and other industries that benefited from low borrowing costs.

“The major story is still what’s happening in bond yields,” said

Edward Park,

chief investment officer at Brooks Macdonald. “Inflation expectations have markedly risen, so the big question in the market has been: What will the Fed do?”

ViacomCBS dropped $9.09, or 9.1%, to $91.25. The media conglomerate said it would sell $2 billion of common shares and $1 billion of preferred stock.

Cruise line shares are falling amid doubts about the coming summer season.

Carnival Corp.

dropped $2.15, or 7.8%, to $25.33, while

Royal Caribbean Group

shed $5.00, or 5.6%, to $83.90.

Though many investors still expect a big economic rebound in 2021, some say they are still awaiting more proof.

“I want to see more data confirming the strong recovery, because I do think we’ve gone about as far as we can go without starting to see the evidence,” said

Tim Courtney,

chief investment officer at Exencial Wealth Advisors. “The fourth quarter earnings were a good strong bit of evidence, but the market is going to want to start to back up these huge price moves we’ve seen with some real earnings and seeing some real growth.”

In commodities, Brent-crude futures, the international energy benchmark, dropped 5.9% to $60.79 a barrel. After surging for much of 2021, oil prices have slid back in recent days. Analysts and traders attribute the retreat to softening purchases of crude by refiners in Asia, Covid-19 restrictions that threaten to knock demand in Europe and an increase in U.S. crude supplies. Rising bond yields have also prompted some investors to pull money from commodity markets, traders say.

“We have increased concerns about vaccines and increased lockdowns, pushing the expected demand recovery out a few months in time,” said

Bjarne Schieldrop,

chief commodities analyst at Nordic bank SEB. There is more supply of crude coming from Iran, he said.

Overseas, the pan-continental Stoxx Europe 600 edged down 0.2%, led by losses in travel stocks. The German government imposed another four-week lockdown, with restrictions over the Easter holiday.

Among European equities, Swedish auto maker Volvo tumbled 7% after saying that the global chip shortage prompted it to reduce production in the second quarter.

Turkey’s benchmark stock index fell 0.1%, extending declines after President

Recep Tayyip Erdogan

replaced the central bank chief. It has lost roughly 10% this week so far. The Turkish lira depreciated 0.9% against the dollar, after plunging 7.5% on Monday in the biggest single-day selloff in nearly three years.

In Asia, most major benchmarks declined by the close of trading. The Shanghai Composite Index dropped 0.9% and Hong Kong’s Hang Seng fell 1.3%. The U.S. and its allies placed sanctions against Chinese…