This post was originally published on this site
Tech stocks were getting knocked lower Wednesday afternoon, with the Nasdaq Composite headed toward a two-week low as a rise in Treasury yields resumed, ahead of an account of the Federal Reserve’s last policy gathering in 2021.
What are stock benchmarks doing?
-
The Dow Jones Industrial Average
DJIA,
+0.16%
rose 70 points, or 0.2%, to 36,867. -
The S&P 500
SPX,
-0.38%
fell 18 points, or 0.4%, to 4,774. -
The Nasdaq Composite Index
COMP,
-1.36%
tumbled 224 points, or 1.4%, to 15,398, hanging around its lowest level since Dec. 22.
On Tuesday, the Dow rose 215 points, or 0.6%, to close at a record 36,800, while the S&P 500 fell less than 0.1% and Nasdaq Composite dropped 1.3%.
What’s driving markets
A wreck in technology-related sectors
SP500.45,
was gathering momentum on Wednesday, with a second loss in store for the first three session of 2022. A rise in government bond yields was contributing to pressure on tech plays, as investors factor in the prospect of higher borrowing costs if the Federal Reserve lifts interest rates as many as the three times as anticipated this year.
On the other hand, financials
SP500.40,
which benefit from a rising rate environment, were headed solidly higher on the day and week.
“Interest rates have been the story for the first few sessions…,” wrote Mark Hackett, Nationwide’s chief of investment research, in a Wednesday note.
The 10-year Treasury yield
TMUBMUSD10Y,
has surged over 17 points in the first two trading days of 2021.
Against that backdrop, investors were boosting value stocks in the financial and industrial sectors, and shunned technology plays.
“Expectations for Fed rate hikes continue to trend hawkish, with the Fed Futures curve now embedding a 66% chance of three-or-more hikes this year, up from 50% a month ago,” Hackett wrote.
The Nationwide researcher cautioned that January’s performance may not offer the clearest seasonal of how the remainder of the year will perform, due to the cloud created by the omicron variant of the coronavirus that causes COVID-19, a disease that has pushed much of the world into an uncertain phase of the pandemic, even if evidence suggests the illnesses caused by the new strain are milder than other variants.
On the economic and policy fronts, a report on private payrolls showed that 807,000 jobs were created in December, according to the ADP National Employment Report, higher than forecast for a gain of 375,000, based on average estimates from economists surveyed by The Wall Street Journal.
“Jobs, jobs, jobs. Today through Friday, Wall Street will be obsessed with jobs reports and their likely influence of inflation and interest rates,” wrote Sam Stovall, chief investment strategist at CFRA Research, in emailed comments.
Strategists use the ADP report to get an early read on the Labor Department’s report on private payrolls, which are scheduled to be released in about 48 hours. The private-sector report recently hasn’t been an accurate predictor of the Friday jobs report.
However, the ADP report is watched because investors will be more attuned to the health of the jobs market during the omicron variant surge.
The labor market and the outlook for inflation also are two factors that policy makers at the Fed will be observing closely as they set up for the new year.
“Should the jobs report show stronger-than-expected additions (currently estimated at 440k) and a sharp drop in the unemployment rate (now estimated at 4.2%) should put pressure on growth stocks,” Stovall wrote. Economists surveyed by The Wall Street Journal look for nonfarm payrolls to show a December rise of 422,000.
The minutes from the latest Federal Open Market Committee meeting in December are due at 2 p.m. Eastern Time. Strategists and investors are anticipating that they could influence the market, given the focus on rising interest rates and higher inflation at the moment.
At the Dec. 14-15 meeting, Fed policy makers agreed to speed the wind-down of the central bank’s monthly asset purchases.
Separately, the final reading of the IHS Markit services purchasing managers index for December came in at 57.6, down from 58 in November but mostly in line from an earlier estimate.
Which companies are in focus?
- The highflying automotive sector also will be in the spotlight, after rallies for Tesla TSLA and Ford Motor Co. F on successive days. General Motors GM is set to release an all-electric Chevy Silverado on Wednesday, while Sony SONY rallied in Tokyo trade after setting up an electric vehicle unit. Shares of GM were down 2.5%, Ford was up 0.3% after a big run-up on Tuesday and Tesla’s stock was 1.1% lower.
-
Shares of Beyond Meat
BYND,
-0.84%
were in focus after said its plant-based fried chicken product is coming to KFC locations in the U.S. next week. Its stock was down 1.9%. -
Boeing Co. shares
BA,
+1.42%
rose 0.9% as the airline industry ordered the aeronautics company’s 737 MAX jet. On Wednesday, the Allegiant Travel
ALGT,
-7.75%
airline, Allegiant Air, ordered 50 MAX jets with an option to purchase 50 more.
How are other assets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y rose 1 basis point to 1.68%, hanging around its highest since late October, based on 3 p.m. Eastern Time levels, according to Dow Jones Market Data. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY was off 0.4%.
- Gold futures GC00 traded higher, with the February contract rising 0.5% at $1,823.70 an ounce on Comex. West Texas Intermediate crude for February delivery CLG22, the U.S. benchmark, rose $1.47, or 1.9%, to reach $78.45 a barrel on the New York Mercantile Exchange.
- Bitcoin BTCUSD fell 1.6%.
- The Stoxx Europe 600 SXXP index closed up less than 0.1%, while London’s FTSE 100 UKX ended its session up 0.2%.
-
The Shanghai Composite SHCOMP declined 1% and China’s CSI 300
000300,
-1.01%
fell 1%, while the Hang Seng Index HSI declined 1.6% in Hong Kong and Japan’s Nikkei 225 NIK edged up 0.1%.
–Steve Goldstein contributed to this article
