US stocks slide in mixed trading as pressure on rates increases
U.S. stock indices are down slightly by midday Tuesday, as another rise in Treasury yields increases pressure on big tech stocks.
The S&P 500 was down 0.3%, a day after slipping from its all-time high, even though almost as many stocks in the index were up and down. The Dow Jones Industrial Average slipped 87 points from its all-time high set the day before, or 0.3%, at 33,080 at 11:30 a.m. EST. The Nasdaq composite fell 0.2%.
The spotlight was once again on the bond market, where the 10-year Treasury yield fell from 1.72% Monday night to 1.74%. It jumped about 0.90% at the start of the year with rising expectations for coming economic growth and possibly inflation.
President Joe Biden is expected to unveil details of spending plans that could represent more than $ 3 trillion in infrastructure and other measures to help the economy and the environment on Wednesday. Yields rose on Tuesday after a report showed consumers feeling even more confident than economists expected, a big deal for an economy made up mostly of consumer spending.
When bonds earn more interest, they can make investors less willing to pay high prices for stocks, especially those considered the most expensive. Firms that ask their investors to wait years for significant earnings growth to materialize are also hit hard, making many large tech stocks the hardest hit by the rate hike.
Broadcom fell 3.2% and Cisco Systems fell 2.4%. Tech giants have also fallen, including drops of more than 1.2% for Apple and Microsoft. They were among the biggest winners at the start of the pandemic, rallying to expectations that they can thrive in the future, whether or not the economy is blocked by a virus.
Despite the pressure on large tech stocks, most professional investors remain bullish that the market as a whole continues to rise. A stronger economy thanks to Covid-19 vaccinations and massive U.S. government spending is expected to help boost profits for many businesses this year, especially those like banks, power producers, and industrial companies.
Just over 45% of S&P 500 stocks were up, and the smaller Russell 2000 stocks were doing better than the S&P 500, whose moves are dominated by a handful of big tech companies. The Russell 2000 was up 1.4%.
Financial stocks were rallying, in part because higher long-term interest rates mean larger profits by making loans.
Large financials also climbed as investors see losses for the industry due to downgraded trades for a large US hedge fund last week, remaining isolated from a few players, rather than cascading through the financial system. . Japanese bank Nomura and Swiss bank Credit Suisse said on Monday they were facing potentially large losses due to their relationships with a major client. Nomura estimated that the claim against his client could amount to around $ 2 billion.
Comerica gained 4.8%. Goldman Sachs was up 1.9% and Morgan Stanley 2%. Reports say the two financial giants were able to limit their losses by quickly selling stocks held by the hedge fund, which has built up large stakes in companies using borrowed money. The banks did not name the fund, but reports identified it as Archegos Capital Management.
Stock markets around the world were mostly stronger. In Europe, the German DAX gained 1.3% and the French CAC 40 rose 1.2%. The FTSE 100 in London was up 0.7%.
In Asia, South Korea’s Kospi rose 1.1%, Japan’s Nikkei 225 0.2%, and Hong Kong’s Hang Seng 0.8%. Shares in Shanghai rose 0.6%.