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Market Reacts to Fed Chair Powell's Remarks

After a quiet start to the week, bond markets resumed their yield advances Wednesday, eventually reaching the peaks registered last Thursday. The yield curve once again steepened as short rates barely budged while longer dated issues added as much as 15 bps. A large portion of the run-up in yields followed Fed Chair Powell's remarks on Thursday in which he indicated that policymakers would not stand in the way of the current bond market selloff. Focusing on the Fed's role in promoting full employment and price stability, Chairman Powell reiterated that the economy is a long ways from levels which would allow the Fed to tighten monetary policy. Equity markets did not react positively to that message, or to the rise in bond yields, pushing stock prices lower and the S&P 500 back towards year-end 2020 levels. Friday's monthly employment report gave some hope for the recovery, with a larger than expected number of jobs gained despite significant winter weather disruptions.

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