Gold bounces off lows, still hit by $US

Even as Powell's remarks began to soothe nerves, markets got rattled again by fresh comments that New York Fed President William Dudley reportedly made Thursday in Brazil.

With its incremental moves in the benchmark lending rate, the Fed is trying to strike a balance between achieving full employment and not allowing the economy to overheat, Powell said in the second day of his semi-annual testimony to Congress.

"In the USA we have at least three rate hikes this year, but in the euro zone, there was some exaggeration about where the inflation was heading so that is now being priced out and yields are moving to the downside", said DZ Bank strategist Daniel Lenz. It had been down earlier in the morning. The 10-year yield, which rises as bond prices fall, is a key barometer for financial markets, influencing borrowing costs for individuals, corporations and state and local governments, along with calculations used to evaluate stock prices.

Stocks wavered as investors dissected Federal Reserve Chairman Jerome Powell's latest comments for clues about the future path of interest rates.

The Standard & Poor's 500 index was down 29 points, or 1.1 percent, at 2,684, as of 3:25 p.m.

The Dow Jones industrial average dropped 366, or 1.5 percent, to 24,669. The Fed has signaled three quarter-point rate hikes for 2018 - the first likely to come at the next Fed meeting in March.

Still, Powell's prepared testimony and parrying of questions during the roughly three-hour hearing at the House of Representatives Financial Services Committee reassured investors about his ability to steer the Fed. He said that the Fed "has seen incoming data which suggests strength in the economy". In testimony before Congress, Powell noted that the Fed planned to continue increasing its benchmark interest rate only gradually.

Higher interest rates discourage investing in gold, which does not bear interest. "In addition, growth in business investment stepped up sharply previous year, which should support higher productivity growth in time".

"By training and experience, he's a capital markets person, not an economist", Phipps said.

The rise in Treasury yields sent stocks that pay big dividends to some of the market's steepest losses.

This shift in attractiveness elsewhere means that stocks are no longer the only game in town, and with higher inflation comes a greater likeliness that investors will spread their assets more widely.

The dollar index gained 0.34 percent, with the euro down 0.27 percent to $1.2198.

The Nasdaq Composite Index declined 17 points, or 0.2%, to 7,254.

Comcast had one of the biggest losses in the S&P 500 after it launched a bid for European pay TV broadcaster Sky.

USA crude oil futures were a touch firmer at $61.73 per barrel after sliding more than 2 percent overnight.

Shares of Walt Disney also fell because the Comcast bid could disrupt its takeover offer for 21st Century Fox. Brent lost more than one percent and WTI more than two percent Wednesday. The dollar index against a basket of six major currencies rose to 90.744, its highest since January 19 and last stood at 90.703.

Spreadbetters expected European stocks to open lower, with Britain's FTSE falling 0.7 percent, Germany's DAX slipping 0.8 percent and France's CAC retreating 0.75 percent.

  • Zachary Reyes