Stocks were lower Thursday afternoon, with the tech-heavy Nasdaq Composite leading the market losses as a jump in U.S. Treasury yields, following the previous day’s Federal Reserve policy meeting, fueled another round of rotation into sectors more sensitive to the economic cycle.
What are major indexes doing?
The more cyclically-tilted Dow Jones Industrial Average
fell 118.37 points, or 0.4%, to 32,897.
The S&P 500
was down 49.34 points, or 1.2%, to 3,924.78.
The Nasdaq Composite
slumped 339.28 points, or 2.5%, to 13,185.92.
Stocks rallied Wednesday after the Federal Reserve vowed it would maintain easy monetary conditions. The Dow closed above the 33,000 milestone for the first time, while the S&P 500 also closed at a record and the Nasdaq Composite reversed a decline to end solidly higher.
What’s driving the market?
The Federal Reserve on Wednesday boosted its outlook for robust economic growth, while Chairman Jerome Powell reiterated that policy makers want to see inflation push above its 2% target, accompanied by significant improvement in the labor market, before it will begin raising interest rates or pulling back on its program of asset purchases.
But Powell didn’t push back against a rise in long-term debt yields, which has seen the yield on the 10-year Treasury note
rise significantly over the past six weeks to its highest level in more than a year on expectations an economic recovery, boosted by trillions of dollars in spending by the U.S. government, will fuel inflation.
The 10-year yield jumped more than 9 basis points Thursday to trade near 1.74%, hitting a 14-month high.
While rising yields can be problematic for stocks viewed as expensive according to metrics like price-to-earnings, stock-market bulls have insisted that the prospects for an economic growth rebound that has contributed to the increase in bond yields reflect a positive backdrop for the market.
“Rates going up now is a positive. It shows the economy is normalizing,” said Frank Rybinski, chief macro strategist at Aegon Asset Management, in an interview.
He noted the rise in bond yields was drawing a movement away from technology shares into equities of more growth-sensitive industries. Indeed, though equities were seeing broad losses on Thursday, cyclical stocks were holding up the best.
“We continue to see this broadening out of the rally. If tech has a cooling and consolidation phase, industrials and more cyclical stocks do a little more catch up here, that’s a pretty healthy base going forward,” said Rybinski.
Meanwhile in U.S. economic data on Thursday, jobless benefit claims rose to the highest level in a month, up by 45,000 to 770,000 in the week ended March 12.
The Philadelphia Fed’s March manufacturing index unexpectedly jumped to 51.8 from a reading of 23.1 in February.
The leading economic index rose 0.2% in February, the Conference Board said.
Which companies are in focus?
Shares of Dollar General Corp.
fell more than 5% after reporting earnings that fell short of expectations.
shares rose 1.1% after the company topped earnings and revenue forecasts and raised its outlook, while also increasing what it will return to shareholders and announcing a bonus for employees.
Shares of Lordstown Motors Corp.
were down 12% after the electric-truck maker late Wednesday reported a wider quarterly loss late Wednesday, reiterating its goal of making its first electric pickups by late September despite a continuing spat with a short seller. The company also disclosed a probe by securities regulators.
Duckhorn Portfolio Inc.
shares slid as it made its debut as a public company. The stock of the Napa Valley winery was down 5.4% from their initial public offering price at Thursday midday. See: 5 things to know about Napa Valley’s Duckhorn wine IPO
How are other markets trading?
The ICE U.S. Dollar Index
a measure of the currency against a basket of the greenback’s six major rivals, was up 0.4%.
Oil futures were under pressure for a fifth straight session, with the U.S. benchmark
sliding 7% to $60.03 a barrel.
Gold futures edged higher, with the April contract
rising $5.40, or 0.3%, to settle at $1,732.50 an ounce on Comex.
The Stoxx 600 Europe index
rose 0.5%, while London’s FTSE 100
In Asia, the Shanghai Composite
rose 0.5%, while Hong Kong’s Hang Seng Index
was up 1.3% and Japan’s Nikkei 225