U.S. markets ended lower for the second consecutive session on Wednesday amid rising bond yields, which made investors jittery, leading to a massive selloff in the high-flying tech stocks and to take refuge in sectors that are more likely to benefit from an economic recovery. All the three major indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) declined 0.4% or 121.43 points to finish at 31,270.09, in a choppy session that saw modest gains and losses.
The S&P 500 slipped 1.3% or 50.57 points to close at 3,819.72 points. Tech and consumer discretionary sectors were the biggest losers. The Technology Select Sector SPDR (XLK) slid 2.5%, while the Consumer Discretionary Select Sector SPDR (XLY) fell 2.4%. Eight of the 11 sectors of the benchmark index closed in the red.
The tech-heavy Nasdaq slipped 2.7% or 361.04 points to close below the 13,000 mark at 12,997.75 points. This was also the index’s biggest two-day percentage decline since Sep 8, 2020. Shares of Apple, Inc. AAPL declined 2.5%, while Amazon.com, Inc. AMZN plummeted 2.9%. Apple has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) was up 10.66% to 26.67. A total of 14 billion shares were traded on Wednesday, lower than the last 20-session average of 14.9 billion. Decliners outnumbered advancers on the NYSE by a 1.31-to-1 ratio. On Nasdaq, a 1.95-to-1 ratio favored declining issues.
Bond Yields Rise, Tech Stocks Suffer
Tech stocks, which have been leading the market rally for quite some time, came under pressure for the second consecutive session on Wednesday after mixed economic data made investors jittery making them rush to the take refuge in other sectors which are likely to benefit from an economic recovery.
Also, higher bond yields have been making investors worry for some time now. On Wednesday, the 10-year Treasury yield continued to advance as high as by 8 basis points to 1.49%. The fresh spike came on Wednesday after the yield surged as high as 1.6%. This is rising concerns about equity valuations and the same time also inflation.
In this scenario, tech stocks are likely to suffer the most given that because they depend on easy borrowing for faster and stronger growth.
Economic data released on Wednesday came in mixed. ADP’s private-payroll data showed 117,000 jobs were added in February, which was far below the economists’ forecast of 225,000.
In another report, U.S. services sector growth decelerated in February. The ISM Nonmanufacturing Index came up with a reading of 55.3 for February, declining 3.4% from January. However, the IHS Markit US services sector purchasing managers index increased to 59.8 in February from 58.3 in the month earlier.
The Fed also introduced a Beige Book that showed a survey of the current economic condition of the country. The survey showed that U.S. economy grew at a modest pace in the last six months of the year ending mid-February.
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