Nasdaq Composite and S&P 500 Drop On Wednesday Amid Jumping Bond Yields

Tech stocks were down on Wednesday and prior days, while stocks in the financial, industrial and other sectors that may rise after the pandemic increased.

Major US stock indexes fell sharply on Wednesday, continuing their decline in the last week:

  • The broad S&P 500 closed down 1.31% on Wednesday, extending its weekly fall to -2.7%;

  • technological Nasdaq Composite fell 2.7%, losing 4.4% over the week;

  • The Dow Jones is down 0.39% and 2.16% over the past week.

The fall in the market was due to the decline in shares of such large technology companies as Apple (AAPL), Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOG, GOOGL) – by 2.5% or more. Netflix (NFLX) shares fell nearly 5% at the close of trading on Wednesday.

Analysts attributed this to continued strong growth in the yield on 10-year Treasury bonds. After hitting a 1.6% high last week, their yield peaked at 1.49% during Wednesday, but closed lower.

This rise in bond yields raises concerns among investors about stock valuations and rising inflation. Higher bond yields could hit tech stocks particularly hard as they rely on borrowing to grow faster.

At the same time, shares of financial, industrial and energy companies, as well as companies that will benefit most from the end of the pandemic, rose on Wednesday. The rise is based on a statement by US President Joe Biden on Tuesday that the country will have a sufficient supply of coronavirus vaccines by the end of May to vaccinate every adult, two months ahead of schedule. The introduction of the vaccine is seen as a key factor in getting Americans back to work and rebuilding the economy.

American Airlines (AAL) shares surged 3.4% on Wednesday, while cruise lines Carnival (CCL) and Norwegian Cruise Line (NCLH) jumped 3.9% and 6.3%, respectively.

The S&P 500 financial and industrial indices hit daily record highs.

Baird investment strategist Ross Mayfield described the situation as follows: “Today is the perfect embodiment of a big theme we’ve seen in the last couple of months: vaccine rollout is going well, the economy is improving, and this is driving higher expectations for profitability and interest rates, which is pushing stocks higher. “.

Representatives of the Federal Reserve System (FRS) note that the US economic recovery has continued at a moderate pace since the beginning of this year. Companies’ expenses are growing, demand for housing is “stable”, but the labor market is still showing slow improvement.

The markets in the next two weeks will focus on discussions in the Senate on the adoption of Biden’s $ 1.9 trillion bill. helping the economy during a pandemic.

If the package of measures adopted by the House of Representatives on Saturday is approved in the Senate, this, on the one hand, will give additional optimism in the market, but, on the other, skeptics are concerned that the stimulus measures will lead to a surge in inflation. Fears that the Federal Reserve will start raising interest rates in the next two years are also mounting amid worries about inflation.

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