U.S. equities reversed losses and staged a rally as Federal Reserve Chairman Jerome Powell reaffirmed his view that the economy needs support. Government bond yields climbed along with oil prices.

Energy and industrial companies led gains in the S&P 500 Index, offsetting weakness for tech stocks. Banks advanced, sending an industry gauge to its highest since 2007, and small caps rallied more than 2 per cent after U.S. regulators said Johnson & Johnson’s COVID-19 vaccine is safe and effective. Tesla Inc. gained after Ark Investment Management’s Cathie Wood said she bought shares during this week’s selloff. U.S. 10-year yields touched 1.43 per cent, the highest since February 2020, before paring the increase.

Powell, testifying before lawmakers, said the U.S. economy still had a long way to go to reach maximum employment and the Fed’s inflation target, a signal he wants to remain accommodative. Equity investors are weighing predictions for a post-pandemic surge in economic activity and corporate earnings with concerns that higher interest rates could dent the appeal of stocks.

“Mr. Powell didn’t say anything different than he has been saying for a couple of months now,” said Matt Maley, chief market strategist at Miller Tabak & Co. “But his comments gave investors confidence that the Fed is still keen on helping asset prices push higher, so they bought on weakness with both hands.”

In Europe, the Stoxx 600 climbed. Travel shares and construction companies were among the top performers.

Meanwhile, Asian stocks tumbled, led by a retreat in Hong Kong after the city announced its first stamp-duty increase on stock trades since 1993. Mainland-based funds sold a record US$2.6 billion worth of Hong Kong stocks through exchange links with Shenzhen and Shanghai. The Hang Seng Index closed down 3 per cent, the biggest retreat in nine months.

Bitcoin climbed back toward US$50,000. The rebound follows a tough week for the digital currency after skeptical comments from Microsoft Corp. co-founder Bill Gates and Treasury Secretary Janet Yellen.

“There’s definitely a debate going on within the market both in terms of interest rates and inflation, but also in terms of economic growth,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “It’s this whole growth-versus-value investing style discussion that happened last year, and now in 2021 I would say it’s been more mixed.”

Some key events to watch this week:

- Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.

These are some of the main moves in markets:

Stocks

- The S&P 500 Index rose 1.1 per cent as of 4 p.m. New York time.

- The Stoxx Europe 600 Index gained 0.5 per cent.

- The MSCI Asia Pacific Index fell 1.9 per cent.

- The MSCI Emerging Market Index fell 1.4 per cent.

Currencies

- The Bloomberg Dollar Spot Index slipped 0.2 per cent.

- The euro strengthened 0.1 per cent to US$1.2166.

- The British pound rose 0.2 per cent to US$1.4139.

- The Japanese yen weakened 0.6 per cent to 105.86 per dollar.

Bonds

- The yield on 10-year Treasuries jumped four basis points to 1.38 per cent.

- Germany’s 10-year yield rose one basis point to -0.31 per cent.

- Britain’s 10-year yield rose one basis point to 0.73 per cent.

Commodities

- West Texas Intermediate crude gained 2.5 per cent to US$63.23 a barrel.

- Gold slid 0.2 per cent to US$1,801.34 an ounce.

--With assistance from Joanna Ossinger, Sophie Caronello, Andreea Papuc and Anchalee Worrachate.