“The financial system is a good distance from our employment and inflation targets,” Mr. Powell mentioned at a listening to of the Senate Banking Committee Tuesday morning, including {that a} substantial restoration “is more likely to take a while.”

A pointy rise in yields on U.S. authorities bonds in current days has sapped buyers’ urge for food for riskier property, together with shares. Shares in know-how firms, which have powered the broader market increased for a lot of the previous 12 months, are seen as significantly weak, because of excessive valuations. Their earnings turn out to be much less priceless in at the moment’s phrases when buyers apply the next low cost charge, because of rising 10-year Treasury yields.

These considerations weighed closely on buyers on Tuesday morning.

Earlier than Mr. Powell’s feedback, the tech-heavy Nasdaq Composite Index dropped as a lot as 4% and investor favorites together with Tesla and Moderna logged double-digit losses. After Mr. Powell began speaking, shares of know-how firms recouped most of their losses, serving to to alleviate strain on the Dow industrials, which additionally closed increased. The blue-chip index added 15.66 factors, or lower than 0.1%, to 31537.35.

The Nasdaq remained caught within the pink, closing down 67.85 factors, or 0.5%, to 13465.20. The tech-heavy index has fallen 5 of the previous six buying and selling periods, leaving it off 4.5% from its Feb. 12 excessive.

The rise in bond yields “naturally does trigger buyers and trigger markets to re-examine the view on equities,” mentioned Paul Jackson, world head of asset allocation analysis at Invesco. Investing in authorities bonds is starting to look extra engaging for the primary time in months, he mentioned.

However “the extent at which bond yields turn out to be really problematic for equities is a good distance from the place we are actually,” Mr. Jackson added.

Some buyers say they’re already re-evaluating their portfolios, although. Most of these strikes contain pulling some cash out of development shares and placing a few of these features into reopening shares and different firms extra tied to the financial system.

Tuesday’s favorites included casinos

Wynn Resorts

and

MGM Resorts Worldwide,

which had been up $9.73, or 7.7%, to $136.48 and $2.07, or 5.5%, to $39.59, respectively, and

Walt Disney,

up $5.33, or 2.8%, to $197.09. Airways, together with Southwest Airways and Alaska Air Group, additionally traded increased.

“We’ve been emphasizing extra the broader financial system and getting publicity to midsized firms,” mentioned Tom Hainlin, nationwide funding strategist at U.S. Financial institution Wealth Administration. The transfer in yields has additionally revived curiosity in pockets of the fixed-income market, Mr. Hainlin added, particularly nonagency mortgage backed securities and company debt.

Bond yields, which transfer reverse of costs, additionally eased following Mr. Powell’s feedback, serving to to take some warmth off the inventory market. The yield on the 10-year U.S. Treasury word was at 1.363% from as a lot as 1.381% earlier within the day. Yields stay under pre-pandemic highs, however buyers say it’s the pace at which yields have elevated, relatively than their stage, that’s hurting shares.

“In the meanwhile, none of these indicators are flashing pink—they aren’t even amber but—however they aren’t as inexperienced as they had been six months in the past,” she mentioned, referring to the extent of yields and expectations of when the Fed is more likely to elevate rates of interest.

Tesla fell $15.66, or 2.2%, to $698.84 after declining nearly 9% on Monday. The transfer got here as the value of bitcoin tumbled.

The most recent bout of volatility in cryptocurrency markets adopted feedback by Tesla Chief Government

Elon Musk,

who mentioned over the weekend that costs for bitcoin and ethereum appeared excessive. The electrical-vehicle maker earlier this month disclosed that it had purchased $1.5 billion in bitcoin. Mr. Musk has additionally turn out to be a outstanding cheerleader for cryptocurrencies.

Shares of know-how corporations and different shares which have carried out effectively in the course of the pandemic got here underneath strain.

Palantir Applied sciences

prolonged its current slide, dropping $1.25, or 4.5%, to $26.75. Funds agency Sq. fell $11.49, or 4.3%, to $256.59.

House Depot

mentioned development might gradual this 12 months, pulling shares down $8.61, or 3.1%, to $267.24.

Different corners of the inventory market thought-about overheated additionally swooned.

Shares of blank-check firms broadly fell, with an ETF devoted to the pattern, the

Defiance Subsequent Gen SPAC Derived ETF,

shedding practically 7%. Reddit-darlings together with GameStop and Magnite fell $1.03, or 2.2%, to $44.97 and $6.52, or 11%, to $52.72, respectfully.

Abroad, the Stoxx Europe 600 shed 0.4%, led decrease by tech shares. In Asia, Hong Kong’s Dangle Seng climbed 1% and China’s Shanghai Composite Index slipped 0.2%.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and Joe Wallace at Joe.Wallace@wsj.com