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Stocks on Tuesday finished lower and Treasury yields climbed as progress on the vaccine rollout in the U.S. and President Joe Biden‘s spending plans lifted optimism about a swifter economic recovery.
Traders also weighed whether the implosion of U.S. hedge fund Archegos Capital will be isolated or exposure to the situation will spread to other banks.
The Dow Jones Industrial Average finished down 104 points, or 0.31%, to 33,066, the S&P 500 declined 0.32% and the tech-heavy Nasdaq slipped 0.11%.
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Bond yields have been rising on investor concern that a stronger economic rebound will lead to higher inflation. Those worries, in turn, have sparked a rotation to value stocks and away from high-growth equities, particularly rate-sensitive technology shares.
Biden on Wednesday is expected to unveil a two-pronged stimulus package with a focus on infrastructure and jobs. A revamp of the tax code is also part of the plan, according to reports.
Ten-year Treasury yields rose to 1.73% on Tuesday. Earlier in the session yields touched 14-month highs as bond investors fretted over Biden‘s plans to boost infrastructure spending as part of his $3 trillion stimulus deal.
“While rates have been in focus with strong prospects of a relatively imminent economic recovery, there may be more to the story,” said Mike Loewengart, managing director of investment strategy at E-Trade.
“Keep in mind that the tech sector has outperformed for the past two years, so a cool down in tech stocks that have been on fire for quite a while, shouldn’t raise too many eyebrows.”
Vaccines from Moderna (MRNA) – Get Report and Pfizer (PFE) – Get Report were “highly effective” in preventing COVID-19 infections “in real-world conditions among health care personnel, first responders, and other essential workers,” U.S. health officials said.
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The Dow Jones Industrial Average on Monday closed at a record in mixed trading Monday as investors weighed the uncertain fallout of the forced liquidation of positions held by Archegos Capital.
Credit Suisse (CS) – Get Report and Nomura Holdings (NMR) – Get Report warned they face potentially significant losses from their dealings with Archegos. Goldman Sachs Group (GS) – Get Report has told clients that any losses it faces from Archegos likely were to be immaterial.
Wells Fargo (WFC) – Get Report said Tuesday it cleared all exposure to Archegos
“We had a prime brokerage relationship with Archegos,” Wells Fargo said in a statement. “We were well collateralized at all times over the last week and no longer have any exposure. We did not experience losses related to closing out our exposure.”
Jim Cramer reviewed the Archegos drama for Real Money here.
Oil prices were pushed lower Tuesday following the rescue of the grounded Ever Given container ship, which had been blocking traffic in the Suez Canal for more than five days.
West Texas Intermediate crude oil, the U.S. benchmark, settled at $60.55 a barrel, down 1.6%.
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