Stock ETFs Fall despite Positive Data and Recovering Bank Stocks

Stock ETFs are falling again on Tuesday, despite investors digesting robust economic data and bank stocks bouncing after the margin call debacle.

The Dow Jones Industrial Average fell 0.41%, slipping from a record closing high, as the S&P 500 declined almost a similar amount lower, having fallen 0.7% earlier. Meanwhile, the Nasdaq Composite dipped 0.37%, having fallen over down 1% earlier in the session, as bond yields surged.

Major stock ETFs are declining on Tuesday as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all lower just after noon EST.

Data on Tuesday revealed that the consumer confidence rating obliterated expectations. The Conference Board’s Consumer Confidence Index rocketed in March to 109.7, its highest reading in a year. Economists polled by Dow Jones projected the index to rise to 96.8 from 90.4 in February.

The report propelled travel and leisure stocks like American Airlines, which popped 4%, and United Airlines, which gained more than 3%. Meanwhile, Carnival, Norwegian Cruise Line, and Royal Caribbean all added 3% or more, and the U.S. Global Jets ETF (JETS) rallied more than 2%, while The First Trust Consumer Discretionary AlphaDEX Fund (FXD) gained almost 1%.

Treasuries Up Again, But So Are Bank Stocks

The 10-year Treasury yield gained 6 basis points to crest 1.77% earlier Tuesday, the highest level in 14 months, as expectations of a broad economic recovery and rising inflation are in play. The yield has pared gains a bit since.

“There’s two different sides to rising rates — is it being driven by fears of inflation or by optimism about the economy? And lately it’s been driven more by optimism about the economy,” said Tom Hainlin, global investment strategist at U.S. Bank Wealth Management.

Meanwhile, investors remain leery after financial stocks and ETFs were ravaged by heightened volatility this week due to the fallout from a hedge fund that was forced to liquidate its position in several media plays.

ViacomCBS and Discovery both bounced however, gaining 5% and 9% respectively, after registering massive losses last week spurred by Archegos Capital Management dumping large blocks of equities at once.

Banks also fared better than they anticipated, as Wells Fargo advanced over 3% after the bank noted it didn’t experience losses related to closing out its exposure to Archegos. Goldman Sachs also added 2.2%, while JPMorgan and Bank of America gained more than 1% each, helping to boost the Invesco KBW Bank ETF (NASDAQ: KBWB) by 1.7% Tuesday.

“The significant tailwinds propelling equities higher and the forces that have driven equities into, during, and now out of the pandemic remain,” analysts at Evercore ISI wrote in a note to clients.

“Investors seem to understand that faster growth, rising earnings growth expectations, still historically low corporate borrowing costs, and pent up consumer demand will fuel further market gains,” the firm added.

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