[ad_1]
Stocks fell sharply on Thursday as the recent market theme – rising bond yields and falling tech company prices – continued to weigh on trade.
Shares of several companies adopted by online retail investors earlier this year were significantly higher, including GameStop, which jumped 71%.
The S&P 500 Index fell 1.7% at 12:14 p.m. Eastern in the afternoon. The Dow Jones Industrial Average fell 356 points, or 1.1%, to 31,669 and the Nasdaq Composite, which is heavily weighted towards technology companies, was down 2.5%.
Once again, it was the bond market that drove the stock market and investor moods. The yield on the 10-year US Treasury bill rose to 1.46%, a level not seen in over a year and well above the 0.92% level it traded just two months ago . This indicated that investors were withdrawing money from bonds, a sign of concern over higher inflation and confidence in economic growth. Every rise in bond yields has recently been matched by a decline in stock prices.
“The bond market is responding to positive economic growth,” said Brent Schutte, chief investment strategist, Northwestern Mutual Wealth Management Company. “It means there is hope on the horizon.”
Tech stocks, which tend to have higher valuations, have been one of the victims of the rise in bond yields. As bond yields rise, more investors are transferring money to these higher-yielding assets, which tends to have a negative impact on stocks valued for growth and not payouts. regular dividends.
Apple, Amazon, Facebook and Microsoft – all of the companies that pushed the stock market up last year – fell 1.7% or more.
The market is likely to see broader growth as real economic growth broadens to include many sectors that were slaughtered during the pandemic, Schutte said. The Russell 2000 index of small-company stocks far outperformed larger indexes, a sign that investors expect broader growth to continue. He noted improvements in retail sales, the housing market and consumer confidence.
“All of these things are strong right now and the backdrop for further gains is still there,” Schutte said.
Global stock markets have skyrocketed over the past six months amid optimism over coronavirus vaccines and pledges of plentiful credit from the central bank to support struggling economies. Those sentiments weakened amid warnings that the rally may be too early and inflation may rise.
Federal Reserve Chairman Jerome Powell said on Wednesday the Fed’s commitment to low interest rates in a second day of testimony to lawmakers in Washington.
The central bank said earlier it would allow the economy to warm up to ensure a recovery is well established after its deepest recession since the 1930s. Powell said maybe more is needed three years to meet the Fed’s 2% inflation target.
Investors also seek Congress approval of President Joe Biden’s economic aid package. This includes checks for $ 1,400 to most Americans. However, the plan faces stiff opposition from Republicans and is still under negotiation. Democrats chose to use the legislative process known as reconciliation which would allow them to pass the bill without GOP support.
After being out of the news for a few weeks, the actions taken by a large group of active retail traders on messaging forums like Reddit have risen again. GameStop’s jump in early trading on Thursday came after its share price more than doubled in the last hour of trading on Wednesday. AMC Entertainment was on track for a fourth straight day of strong increases Thursday.
[ad_2]
Source link