Dow Jones Cuts Losses As Treasury Yields Tumble; Apple Sells Off, Tesla Stock Slashes Losses Amid Strong China Sales

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Investor's Business Daily 08 July, 2021 - 12:07pm 15 views

Tech companies help pull stocks broadly lower on Wall Street | Taiwan News | 2021-07-09 00:03:46

Taiwan News 09 July, 2021 - 12:03am

The S&P 500 index fell 1.1% as of 11:37 a.m. Eastern. The Dow Jones Industrial Average fell 323 points, or 0.9%, to 34,357 and the Nasdaq composite was down 1.3%.

Technology companies were having some of the biggest losses, which helped pull the Nasdaq composite down more than the broader market.

The yield on the 10-year Treasury note fell to 1.30% from 1.32% a day earlier. The benchmark yield, which is used to set rates on mortgages and many other kinds of loans, has been falling steadily in recent weeks as traders shift money into bonds. The 10-year yield traded as high as 1.74% at the end of March.

The bond market has been signaling concerns over the strength of the recovery for months, specifically that it may have peaked and is now leveling off to a steadier pace. The stock market has largely ignored those signals, analysts said, but could be coming around to that message amid struggling job growth and lackluster economic reports.

The number of Americans filing for unemployment benefits rose slightly last week even while the economy and the job market appear to be rebounding from the coronavirus recession.

Thursday’s report from the Labor Department showed that jobless claims increased by 2,000 from the previous week to 373,000. Weekly applications, which generally track the pace of layoffs, have fallen steadily this year from more than 900,000 at the start of the year.

Investors are also gauging the potential impact from COVID-19 variants stymying a resurgence in commerce and travel. Fans are banned from the Tokyo Olympics following a state of emergency aimed at containing rising coronavirus infections in the capital.

Part of the sharp drop in long-term bond yields could also be attributed to investors quickly reversing bets that they would continue rising as the economy continued its sharp recovery.

Investors have swung between enthusiasm about an economic recovery and unease that the Fed and other central banks might roll back stimulus to cool pressure for prices to rise.

Minutes from the Fed's June meeting showed officials are moving closer to reducing bond purchases, though most analysts don’t expect a reduction until late this year. At that meeting, policymakers said they planned to raise interest rates as soon as 2023, earlier than previously expected.

Investors will be turning their attentions to corporate earnings starting next week, when the major banks like JPMorgan Chase, Goldman Sachs and Bank of America start report their results. Banks tend to be a proxy for the overall economy, so investors will be analyzing the reports closely and listening to what banks say about the status of lending and spending as the recovery continues.

Dow drops 200 points amid global economic recovery concerns, bond yields slide

CNBC 07 July, 2021 - 05:03pm

The major U.S. stock indexes fell on Thursday on concern about the global economic comeback from Covid-19. The losses came as Japan declared a state of emergency in Tokyo for the upcoming Olympics and as countries deal with a rebound in cases because of Covid variants.

The Dow Jones Industrial Average dropped about 200 points, or 0.6%. The S&P 500 lost 0.7%. The Nasdaq 100 Composite fell 0.7%. Both the S&P 500 and Nasdaq Composite closed at records in the prior session because of gains from tech shares.

The Labor Department's latest jobless claims data came in unexpectedly higher at 373,000, signaling a possible slowdown in the the labor picture amid the Covid recovery. Economists expected to see 350,000 first-time applicants for unemployment benefits for the week ended July 3, according to Dow Jones.

Losses were led by companies that would benefit from a rapid economic comeback from the virus. Shares of Carnival and Royal Caribbean each dropped more than 1%. American Airlines and Delta Air Lines each fell 1%. Nike and Ford were also lower. Retailers Nordstrom and Home Depot lost nearly 3%.

Chip stocks also fell on concerns about the pace of the global recovery. Micron, NVIDIA, Qualcomm, Intel and Applied Materials were all off by more than 1%. Technology stocks also decline with Microsoft, Apple, Facebook and Google-parent Alphabet all in the red.

"The market has been in one of those 'Goldilocks' stretches when economic growth was accelerating while inflation and interest rates remained low. Increased Covid cases, particularly Delta Variants have caused concerns that the economic acceleration will slow," said Timothy Lesko of Granite Investment Advisors. "A few weeks ago the porridge was too hot, now it seems it is too cold. With markets at all time highs and some valuations stretched there is little room for economic slowdown in this market."

Investors rotated into the safety of Treasuries further on Thursday, pushing the yield on the 10-year Treasury to 1.25% to the lowest since late February. Despite the recovering economy and fast inflation, the 10-year Treasury yield continues to decline. It was at 1.58% to start July and hit a 2021 high of 1.78% in March. Traders remain confused about the exact reasons for the rollover in yields, with many citing concern that the best of the economic recovery may be behind us.

Bank of America, Wells Fargo, Goldman Sachs and other financial shares declined on Thursday as their profitability outlook dimmed with lower rates. JPMorgan Chase and PNC Financial were also lower.

"Nothing suggests the near slump in yields is over," wrote Christopher Harvey, head of equity strategy at Wells Fargo, in a note Thursday. "A sharp drop below 1.25% could cause equity PMs to believe that something is wrong or broken. As a result, we see a growing possibility of a 5% selloff in equities before earnings season."

Harvey noted he believes the buying in bonds is more technical in nature and not due to macroeconomic factors.

The Summer Olympics in Japan — which have already been delayed for a year — will ban spectators, Reuters reported on Thursday. This follows the state of emergency declaration for Tokyo by Japan to curb a wave of new Covid infections. The state of emergency will begin July 12 and run through Aug. 22, while the Games are scheduled from July 23 to Aug. 8.

Meanwhile the global Covid death toll continued to advance, exceeding 4 million on late Wednesday, as countries including India battle more transmissible variants.

The Cboe Volatility index, or 'VIX,' surged above the key 20 level Thursday morning and then retreated to around the 18 level.

The move lower in futures came after a positive regular session for U.S. markets led by tech stocks on Wednesday. The S&P 500 rose 0.3% to an all-time high of 4,358.13, while the Dow Jones Industrial Average advanced 104.42 points to 34,681.79. The technology-heavy Nasdaq Composite closed just above its own flatline to eke out a record close.

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