Traders were left disappointed last night after Federal Reserve chair Jerome Powell did not indicate that the Fed might step up purchases of long-term bonds …

Wall Street has apparently decided to get ahead of the Fed by staging a taper tantrum before any actual taper. Theres no sign of the Fed rolling back its accommodative monetary policy in any way, but investors seem convinced the day will come. The feeling grew stronger Thursday when Fed Chairman Jerome Powell said the magic word, inflation, in public remarks, noting that reopening could create upward pressure on prices. Basically, Powell took everybody by surprise, kind of wobbling on the dovish tone hed had last week. He sounded like he could see central banks starting to scale back monetary stimulus a little earlier than expected. Wall Street responded with more selling, discarding bonds and stocks amid worries about economic overheating. Treasury yields boomeranged as high as 1.55%, not far below last weeks one-year peak and close to 15 basis points above this weeks lows. We noted this morning that the stock market has been getting shaky when yields top 1.45%, and that happened pretty quickly today. Keep in mind, however, that 1.5% or so is very low, historically. Fear seems to be growing that the Fed might get behind the curve, as the saying goes, meaning basically it could be waiting too long to tighten policy as the economy emerges from the pandemic. Powell, of course, needs to focus on employment reviving, and thats not really happening. Meaning the Fed isnt in a hurry to roll anything back. Thereve also been some rumblings about the proposed $1.9 trillion stimulus, which the Senate began voting on Thursday. This isnt a political column, but some economists say the level of spending in the bill would have made more sense a few months ago but may be more than the economy needs now, according to the Washington Post. That could be playing into market concerns about possible overheating, too, though not all economists necessarily agree with that point of view. The S&P 500 Index (SPX), which finished down about 1.3% at 3768, well off its session low, is now down nearly 4% from Mondays close. It hasnt posted a new high since Feb. 16 when it hit 3950, a point its now nearly 5% below. Typically, a 10% drop is considered a correction. The Nasdaq (COMP) did worse, falling more than 2%. The small-cap Russell 2000 (RUT) brought up the rear with a 2.7% decline. It didnt feel like any of the indices gained much momentum into the close, so well have to keep a close eye on the futures market overnight for clues about tomorrow. Employment data early tomorrow will likely tell the tale. Tech Check Continues, But Apple, Microsoft Outperform From a sector perspective, Technology continues to lead, but on the wrong side of the ledger. It fell more than 2.2% Thursday. People are taking profits in some of the high-flyers that have been big beneficiaries of the Feds easy money policy. The semiconductor segment of Tech, which for a while had outpaced Tech overall on ideas that an economic recovery would raise chip demand, got slapped around even harder Thursday, down more than 4%. It was interesting to see two of Techs biggest light posts, Apple Inc (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT), outperform the broader sector a bit. If theres going to be a Tech revival, those two so-called mega-caps would probably need to participate. AAPL shares are now down 17% from their all-time high of late January. Also, some of the major Communication Services names like Alphabet Inc (NASDAQ: GOOGL), Facebook, Inc. (NASDAQ: FB), ViacomCBS Corporation (NASDAQ: VIAC), and AT&T Inc. (NYSE: T) had at least OK days. It may be because at times like these, people tend to go into more of the names that they know and have done well with. The Nasdaq-100 (NDX) is now in correction mode, down 10% from highs. Stocks like Tesla Inc (NASDAQ: TSLA), Zoom Video Communications Inc (NASDAQ: ZM), and Peloton Interactive Inc (NASDAQ: PTON) are taking it on the chin, all down 20% from their peaks. Financials also crumbled Thursday after leading things higher earlier this week, while Industrials and Materialstwo sectors that normally do well during times of economic recoverygot hammered. Boeing Co (NYSE: BA) and Archer-Daniels-Midland Co (NYSE: ADM) both lost ground. It was interesting to see Financials fall despite rising yields, but they did come back a bit at the end of the day, and it might just reflect a general regrouping going on. Perhaps when we look back, well see this day in context of people turning more toward value stocks and away from the growth names, but thats a see-saw thats gone back and forth a lot over the last few months. If youre wondering about technical support for the SPX, its changing fast. Going into Thursday, it was near the 50-day moving average of 3817, but that got broken minutes into the session. Now you have to look at 3725, near the early February low. The SPX bounced off of that late in Thursdays session (see chart below), but look out below if it carves further down tomorrow. The 100-day moving average of 3683 would be in sight. The SPX last traded below its 100-day MA in late October, and bounced off it twice last fall. The Cboe Volatility Index (VIX) went above 30 at one point intraday before falling toward 28. Thats still above the 20-25 range it had been in for several weeks before this market hiccup. CHART OF THE DAY: OH, THAT 50-DAY. The S&P 500 Index (SPXcandlestick) has flirted with the 50-day moving average (blue line) several times in recent days, including a close yesterday right at the level. The session low of 3723 was essentially the same spot where the 50-day figured prominently a little over a month ago. The SPX settled below the 50-day on Jan 29, but on Feb 1 it managed to settle above it, and then took off to the upside (see purple line). Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. Is Good News Good Or Bad These Days? The pandemic served up a gut-punch to the economy in 2020no arguments thereand were still feeling the effects. But when you consider the collective action by the Fed and fiscal authoritiesplus the general agreement that better days lie aheadthe market has been able to largely shrug off bad news. And arguably, its been able to take the bad-news-is-good argument, where a weak string of numbers has helped provide the impetus for a swifter and stronger stimulus. All the while, the march toward a vaccinated populace continues. Against that backdrop, its easy to see whyat timesboth good news and bad news have been able to push the market to new heights. Now, many seem to be asking whether were at an inflection pointone that returns markets to their normalized response mode, meaning that bad news is bad for markets and vice versa. At least thats the general feeling after seeing the markets reaction to inflation rumblings. Tomorrow morning well get a fresh look at the state of employment in the U.S. Regardless of the number reported, its possible that markets will interpret it as being headed in the right direction, but not quickly enough. Tomorrows payroll number is expected to show an addition of 200,000 jobs, according to consensus compiled by Briefing.com. Under normal circumstances that might be an out-of-the-park number, but were still playing catch-up after the pandemic. It would still be an improvement from just 49,000 in January and a negative result in December. These numbers just arent where youd expect them to be if the economy is really coming back. Rate Hikes Still Seen Unlikely If youre worried about the Fed hiking rates, dont expect it anytime soon, even if job numbers improve in a big way and yields keep rising. Though a lot of inflation indicators are flashingespecially commodities like crude and copperthe weak jobs picture means its unlikely well see anything from the Fed. The rising rates reflect the optimism surrounding an improving economy, research firm CFRAs Sam Stovall wrote in a note earlier this week. (Rates) will need to move much higher before causing concern by forcing the Feds hand in hiking short-term rates sooner than anticipated. The chance of even a single 25-basis point hike by the end of the year stands at 4.1%, according to CME Group Fed funds futures. That said, there are some options for the Fed if it wants to lower the steepening yield curve (measured by subtracting the 2-year yield from the 10-year yield). In 2011, the Fed executed a twist where it started selling its shorter-term paper and buying longer-term Treasuries to manage the so-called long end of the curve. In this scenario, longer-dated yields would probably fall, taking some pressure off of parts of the economy more vulnerable to pressure from rising long-term rates. Think housing and automobiles. The last thing the Fed probably wants to do is let yields get out of hand and start clipping the recovery. TD Ameritrade® commentary for educational purposes only. Member SIPC. Photo by Tech Daily on Unsplash See more from BenzingaClick here for options trades from BenzingaMore Pressure On Tech Sector To Start Day, With Apple, Microsoft Both LowerDirection Hard To Find As Market Keeps Chopping Ahead Of Key Jobs Data© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.