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Stocks bounce back after Fed Chair eases investor anxiety: The headlines and your money

Plus: Americans have upped their retirement savings during the pandemic.

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US Federal Reserve Chairman Jerome Powell speaks during a press conference after a Federal Open Market Committee meeting in Washington, DC on July 31, 2019.
Andrew Caballero-Reynolds | AFP | Getty Images

Stock indexes yo-yo, Fed chairman Powell addresses Congress, and Americans have boosted retirement savings during the pandemic. Here's how the headlines could affect your money.

Stock indexes slump, then recover

Stock indexes did something of a 180 on Tuesday. After dipping on fears of impending inflation, indexes bounced back following favorable comments from Federal Reserve Chairman Jerome Powell. The Dow Jones Industrial Average managed a 0.1% gain, as did the S&P 500. The tech-heavy Nasdaq Composite ended the day down only 0.5%, though it had shed as much as 3.9% earlier.

Some prominent tech stocks followed a more extreme version of the same pattern. Tesla finished the day down 2.2% after surrendering as much as 13%, while Apple lost only 0.1% after being down by 6%.

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Powell's testimony assuages investor fears

Powell told the Senate Banking Committee on Tuesday that Fed policies favoring economic growth – such as ultralow interest rates – would continue. "The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," he said.

The pandemic "has also left a significant imprint on inflation," he added, and signaled that it isn't currently a major threat to the economy.

Powell's comments eased worries among investors that impending inflation and rising long-term bond yields could eat into stock returns. 

Americans have upped retirement savings during the pandemic

Although many Americans have struggled with Covid-related job losses or reductions in hours or pay, employed workers were largely able to maintain or up their retirement contributions, according to data from Fidelity.

Savings rates in workplace retirement accounts among Fidelity customers reached record levels in the fourth quarter of 2020: Savers stashed away 9.1% of their pay in 401(k) plans and 7.3% in 403(b)s. If you haven't begun saving in a workplace retirement account, experts recommend you contribute at least enough to get any match your employer offers.

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Words you've heard: demand-pull inflation

Investors worry that the flow of stimulus money into the economy will trigger demand-pull inflation, meaning consumer demand could grow faster than the supply of goods and services, causing prices to increase.

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