Benchmarks closed sharply lower on Thursday as spike in U.S. Treasury yields fueled rotation into cyclical sectors expected to benefit from the rebound in economic growth. Investors moved out of tech stocks that benefited from the work-from-home trend compelling the Nasdaq to drop 3%.
The Dow Jones Industrial Average (DJI) fell 153.07 points, or 0.5%, to close at 32,862.30 and the S&P 500 slid 58.66 points, or 1.5%, to close at 3,915.46. The Nasdaq Composite Index closed at 13,116.17, declining 409.03 points, or 3%. The fear-gauge CBOE Volatility Index (VIX) increased 12.2%, to close at 21.58. Declining issues outnumbered advancing ones for 3.69-to-1 ratio on the NYSE and a 3.42-to-1 ratio on the Nasdaq favored decliners.
How Did the Benchmarks Perform?
After posting record highs on Wednesday, the S&P 500 and the Dow closed sharply lower yesterday as stocks were under pressure from rising bond yields and falling energy prices. Of the 11 major sectors of the broader index, only the financials closed in the green.
The energy sector dropped 4.7% as crude oil futures fell 7%, its biggest one-day loss since September last year. Some European countries have to battle a third wave of the COVID-19 pandemic. Slow vaccine rollout int those regions have led to less travel and lower energy demand. Shares of Chevron Corporation CVX and Exxon Mobil Corporation XOM closed 3.6% and 4.3% lower. Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rising treasury yield weighed on the tech-laden Nasdaq heavily, pushing it to fall 3% on Thursday, its worst day since Feb 25. Bigwigs like Apple Inc. AAPL, Amazon.com, Inc. AMZN and Netflix, Inc. NFLX fell more than 3%, while Tesla, Inc. ((TSLA)) closed 6.9% lower. The S&P 500 technology sector closed 2.9% lower for the day.
Overall, the S&P 500 posted 85 new 52-week highs and no new lows, while the Nasdaq Composite recorded 213 new highs and 28 new lows. A total of 12.8 billion shares were traded on Thursday, lower than the last 20-session average of 14.2 billion.
10-year Treasury Yield Hits a 14-Month High
The yield on the 10-year Treasury note has been rising in the past six weeks, supported by strong economic data, Biden’s $1.9 trillion fiscal stimulus bill and Fed’s dovish policy. On Thursday, the benchmark 10-year Treasury note crossed 1.75% to hit a 14-month high in turn raising the specter of inflation. The 30-year rate also jumped 6 basis points, breaching the 2.5% level at one point of the session, for the first time since August 2019. Earlier on Wednesday the Federal Open Market Committee had projected the strongest growth in nearly 40 years as the pandemic woes eases and pledged to keep interest rates near-zero through 2023, despite fears of rising inflation.
The spike in treasury yield pushed investors to move out of technology stocks that benefited during the pandemic due to the work-from-home trends and invest in more economically-sensitive industries. Banking stocks outperformed yesterday as they tend to profit from widening gap between the rate they borrow at in the short term and the rate they lend out at in the long term. Shares of U.S. Bancorp USB jumped 3.3%, followed by at least 2.4% rise in shares of Wells Fargo & Company WFC and Bank of America Corporation ((BA))C.
Initial Jobless Claim Jumps to 1-Month High
On Thursday, the U.S. Department of Labor reported that initial jobless claims increased by 45,000 to 770,000 in the week ended Mar 13. The number of new claims rose to a one-month high, surpassing the consensus estimate of 705,000 and previous week’s revised figure of 725,000.
Stocks that Made Headline
FedEx (FDX) Gains More Than 4% on Q3 Earnings & Revenue Beat
FedEx Corporation FDX reported strong third-quarter fiscal 2021 (ended Feb 28, 2021) results despite severe winter affecting performance in February. Following this, shares of the company rose 4.4% in after-hours trading on Mar 18. (Read More)
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
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