Promote-off accelerates amid rising bond yields, Dow falling 550 factors
US stocks fell sharply on Thursday as a surge in bond yields caused investors to dump risk assets, particularly soaring technology stocks.
The Dow Jones Industrial Average fell 550 points after closing at a record high in the previous session. The S&P 500 was down 2.4% while the tech-heavy Nasdaq Composite was down 3.3% as Alphabet, Apple and Microsoft all fell more than 2%. Tesla fell 7%.
Key averages fell to their session lows as the 10-year government bond yield rose more than 16 basis points to a high of 1.614%, its highest level since February 2020. The jump also set interest rates above the S&P 500 and dividend yield the relative attractiveness of stocks that are already considered riskier assets decreased.
It’s “just a complete success in the bond market. So that fits in with everything else,” said Dennis DeBusschere, ISI strategist at Evercore. “It looks like we just had a flash move in bonds. With a puke move that drove [10-year] Returns to 1.6% … we just have to wait for an equilibrium in bonds. “
Higher rates tend to hit the tech sector particularly hard, as the group relies on easy borrowing for superior growth. The tech-heavy Nasdaq is down 4.8% this week, the second straight weekly loss. Consumer discretionary and information technology are the two biggest losers among 11 S&P 500 sectors, falling 4.7% and 3.8% respectively.
Investors are moving to areas of the market that would benefit most from an economic reopening. This week alone, Energy is up 6.8%, by far the biggest winner. Industry and finance are the only other sectors in the Green Week so far.
“US stocks will continue to grow together closely [their] Based on the evolution of government bond yields, “said Edward Moya, senior market analyst at OANDA.” The Nasdaq will continue to lead the decline while some investors may prefer to continue rotating back into REITs, consumer staples, financials and utilities. “
Yields helped their progress even after Fed chairman Jerome Powell stressed the central bank’s commitment to loose policy and downplayed inflation risk. It could take three years or more to meet the Fed’s goals.
Investors shook off better-than-expected economic data on Thursday. The number of initial jobless claims for the week ending February 20 stood at 730,000, compared with a pressure of 845,000 expected by economists polled by Dow Jones. Durable goods orders rose 3.4% in January, compared to a Dow Jones consensus of 1.0% growth.
GameStop, the controversial Meme stock whose massive short squeeze shocked Wall Street last month, is on the rise again. Shares rose more than 80% in volatile trading after doubling in the previous meeting due to the reported fall of a board chairman.
– CNBC’s Tom Franck contributed to the coverage.
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