The three major U.S. stock indexes closed lower on Wednesday (3), with the technology-based Nasdaq index falling 2.7%, as the U.S. bond yield rose again and investors sold off high-valuation technology stocks to those supported by fiscal stimulus and vaccination programs that are more likely to benefit from the economic recovery of the class.
Dow Jones Industrial Average 3 closed down 121.43 points, or 0.39%, at 31,270.09 points; S&P 500 closed down 50.57 points, or 1.31%, at 3,819.72 points; Nasdaq fell 361.04 points, or 2.7%, at 12,997.75 points, falling to the lowest level in early January, making this year’s gains convergence to less than 1% this year.
The S&P 500 was lower for the second day in a row, with the Dow Jones falling the least among the major broad market indices.
Microsoft, Apple and Amazon shares fell more than 2%, the biggest drag on the S&P 500, overshadowing the gains in banks and energy stocks. The S&P 500 Financials and Industrials indices touched record intraday highs. Most other S&P 500 stocks fell.
Baird investment investment strategist Ross Mayfield said: “Today highlights the big themes we’ve seen over the last few months, namely that vaccinations are going well, the economy is improving, pushing up colonial rates and interest rate expectations, which hurts growth stocks.”
With the U.S. 10-year bond yield approaching 1.5%, the bond market is pricing in the highest five-year Inflation expectations since 2008, which is putting pressure on the more highly valued market. However, the bond yield is still below the high of more than 1.61% touched last week, when the stock market was hit by investors betting on rising inflation.
Rising interest rates are particularly damaging to growth technology companies, as investors are valuing them based on expected earnings over the next few years.
Volatility has increased and we have experienced more substantial rallies and falls,” said James Ragan, director of research at DADavidson Wealth Management, “The focus continues to be on rising colonial rates and their impact on some highly valued classes of stocks “.
Michael Stritch, chief investment officer at BMO Wealth Management, said: “If the colonial rate exceeds 1.5%, the stock market will certainly be adversely affected. Most investors will be watching closely the rate of increase in the colonial rate.”
A report released by the Federal Reserve on the same day showed that the U.S. economy continued to recover at a moderate pace in the first weeks of the year, with businesses optimistic about the coming months and strong housing demand, but the job market improving only slowly.
Although vaccinations are expected to boost the economy, the data showed that the number of private jobs increased less than expected in February, suggesting that the job market is difficult to restore the growth rate.
Oil giant Exxon Mobil rose 0.8% after the oil company announced plans to raise dividends and cut spending, but the financial test was not as bold as in previous years.
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