Stocks become nervous as bond yields rise

Stocks become nervous as bond yields rise

US stocks fell on Wednesday as technology stocks continued to decline and government bond yields rose.

The S&P 500 is down 0.5%. The Nasdaq Composite is down 1%, in reference to the Decrease in technology stocks For the second day. The Dow Jones Industrial Average fell less than 0.1%.

The yield on the 10-year US Treasury rose to 1.476% from 1.413% on Tuesday. This is still down from the 1.513% recorded last month. Yields rise when bond prices fall.

Stocks have been nervous in recent days, with the major indicators swinging daily between losses and gains. Some money managers have grown increasingly concerned that the stimulus measures will lead to higher inflation and undermine the value of bond yields. Concerns about inflation have also led to bets emerging that the Federal Reserve may start raising interest rates in the next two years.

Senior central bank officials said the higher yields reflected optimism about the economic outlook and that they plan to keep monetary policy loose to support the economy for the foreseeable future. Fed Governor Lyle Brainard said Tuesday that The recent turmoil in the bond market is on its radar. She said she would be concerned if she “saw disorganized conditions or constant tightening.”

“This high volatility is expected,” said Sima Shah, chief strategist at Principal Global Investors. “What we were taken by surprise was the timing of this because most people were expecting to see these problems come later in the year, or early next year.”

Sentiment was briefly boosted earlier in the day by signs that Democrats will seek to bridge differences over unemployment benefits and other issues as they aim to complete a $ 1.9 trillion relief package in the coming days. Mr. Biden also said the United States will Enough Covid-19 vaccines for all American adults By the end of May, two months earlier than he said earlier.

“The launch of the vaccine is going very well compared to many expectations,” said Ms. Shah. “And while it looks like the economy can recover on its own, we also have the potential for fiscal stimulus in the background, and it’s leading many people to raise the level of growth expectations in the United States.”

Optimism about better economic prospects is particularly fueling demand for shares in companies that will benefit when the economy returns to normal, said Chris Dyer, director of global equities at Eaton Vance. This includes banking and energy stocks, which outperformed the technology sector this year.

“We can see the light at the end of the epidemic tunnel,” said Mr. Dyer. “The progress that has been made in the area of ​​vaccinations has led to confidence in the economic recovery and I have seen companies geared toward this economic recovery do well in recent months.”

Ms Brainard indicated on Tuesday that the Fed will not restore support for the economy until it is on a stronger footing, echoing comments made by other officials.

The Fed has strongly indicated that it is willing to be patient, but too [that] “High yields are an indication of strong growth, so this is a good environment for stocks to enter,” Ms. Shah said.

After the opening bell

Lifts

It is up about 5% after ride-sharing company revealed strong rides numbers for February late Tuesday as rival Uber rose 3.5%.

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Investors are awaiting data on activity in the services sector from the Institute for Supply Management, at 10 a.m. ET. Figures are expected to show that sector activity expanded for the ninth consecutive month in February.

The Fed’s Beige Book report, due for delivery at 2 p.m. ET, will present the latest set of business anecdotes and provide insights into how companies prepare to reopen the economy.

In the commodities markets, Brent crude, the international benchmark for oil, rose 1.5% to $ 63.62 a barrel. Gold prices fell 1.3%.

Abroad, the Stoxx Europe 600 continental index is down 0.1%.

Gained most of the major Asian indices. The Shanghai Composite Index in China rose nearly 2%, while the Hang Seng Index in Hong Kong jumped 2.7%. Japan’s Nikkei 225 is up 0.5%, and South Korea’s Kospi is up 1.3%.

Traders work on the floor of the New York Stock Exchange on Tuesday.


Photo:

Colin Zimmer / Associated Press

Write to Will Horner at [email protected]

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