Stocks and index ETFs continued to exhibit volatility Thursday, as technology stocks and the Nasdaq tumbled below Wednesday lows. Meanwhile, a rally in bank stocks fueled the Dow Jones Industrial Average to a fresh high.
The Nasdaq Composite sank 1.7% as key tech stocks like Apple, Alphabet, Microsoft, and Facebook all lost 1-2.5%, while Tesla fell 4.5%. Meanwhile, the Dow gained 0.25% to notch a new intra-day high, bolstered by bank stocks like JP Morgan and Citibank. The S&P 500 lost 0.65%, testing the prior day’s lows as well, as Treasury yields surged again.
Major stock ETFs are mixed Thursday as well. The SPDR Dow Jones Industrial Average ETF (DIA) is continuing to gain, while the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ) are both broadly lower.
The 10-year Treasury yield popped another 11 basis points to 1.75%, its highest level since January 2020, while the 30-year rate crested the 2.5% level for the first time since August 2019, putting pressure on growth stocks by damaging their future values.
“Risk of rates rising too fast remains a key concern,” said Craig Johnson, technical market strategist at Piper Sandler. “Buying pressure has not been equal over the last several weeks as growth stocks lag behind due to headwinds from higher interest rates.”
Bank stocks rallied however, as higher interest rates help financial companies to better their profit margins. Banks can take advantage of the widening spread between short- and long-term rates for borrowing and lending. JPMorgan jumped 2%, while Goldman Sachs gained 1.9%. Citizen Financial popped 4% and Zions Bancorp rallied 3.6%, while the Invesco KBW Bank ETF (NASDAQ: KBWB) jumped 3% Thursday amid the moves.
Economic data may also be weighing on investor minds as weekly initial jobless claims totaled 770,000 for the week ended March 13, in contrast to the estimate of 700,000 from economists polled by Dow Jones.
Meanwhile, the Philadelphia Federal Reserve’s manufacturing index revealed a reading of 51.8, beating the Dow Jones consensus of 22.0 to peg the highest level for the gauge since 1973.
In the Federal Reserve meeting Wednesday, Fed Chairman Jerome Powell said the Fed plans to monitor the economic backdrop and do what is necessary to bolster it, while allowing inflation to reach 2%.
The main message from Wednesday’s Fed meeting “is that the committee expects to be extraordinarily accommodative for a very long time to come, even as the economic outlook brightens,” wrote Eric Winograd, senior economist at AllianceBernstein.
“The FOMC shares the market’s view that growth and inflation are likely to rebound as activity surges in 2021, but it does not view that surge in activity as durable,” he added.
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