Traders on the floor of the New York Stock Exchange.
Source: New York Stock Exchange
Futures on major US stock indices fell during the overnight session on Thursday evening, after a rise in interest rates earlier in the day helped push the Nasdaq Composite to its worst session in October.
Dow futures fell 150 points, or 0.5%, while the Nasdaq 100 futures fell 0.9%. The S&P 500 futures lost 0.5%.
The movements in the extended trading took place on Thursday after a negative regular trading session.
The Dow Jones industrial average fell 559 points, or 1.8%, from a record high. The S&P 500 lost 2.5% to its worst day on Jan. 27, while the technologically strong Nasdaq Composite lost 3.5% and suffered its biggest one-day sale since October 28.
The momentum that led to historic highs earlier this month met with resistance amid a sharp and sharp rise in bond yields. The 10-year US Treasury rate rose briefly to 1.6% on Thursday, before falling back to about 1.52%, the highest level since February 2020.
The 10-year yield has risen by more than 50 basis points since the beginning of the year, a rapid increase in the bond rate used as a benchmark for mortgage rates and car loans.
Economists and investment managers say rising rates are an appropriate reaction of the bond market to a positive economy, as vaccines are launched and GDP forecasts are improving, which should benefit companies’ profits.
But the sheer pace of growth has also had the effect of diminishing investors’ appetite for rich areas of the market. Thursday’s 10-year yield jump also placed it above the S&P 500 dividend yield, meaning that the shares – which are considered riskier assets – lost their fixed bond premium.
“Until recently, market participants were able to digest the upward trend in long-term rates, but it seems that the next rise in interest rates is a bigger bite to chew,” said Charlie Ripley, senior investment strategist for Allianz Investment Management, said in an email.
“Looking at where real yields were, they were simply too low when growth expectations were taken into account, and real long-term yields are likely to continue to decline further as economic data improves,” he added. he.
Popular high-tech stocks, such as Alphabet, Facebook and Tesla, all of which started the year on a strong footing, fell 3.2%, 3.6% and 8% on Thursday. Apple, one of the largest companies in the world, with large cash, has seen its shares fall by more than 15% in the last month.
Instead of technology, where companies tend to borrow more on average, investors transfer money to so-called reopening transactions, buying shares of companies that would benefit most from the vaccine launch and a return to regular travel and restaurant trends. .
Energy gained 6.8% this week alone, by far the biggest winner amid expectations that consumers around the world will soon drive and fly as they did before the Covid-19 pandemic. Industry and the financial sector are the only two other sectors from Green Week so far.
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