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The US stock market traded in various directions at the end of yesterday's trading session, which is due to the strengthening of the oil and gas, raw materials and finance sectors. Meanwhile, the technology, utilities and consumer goods sectors showed negative indicators.
NASDAQ Composite stock index unexpectedly plunged due to the growing yields in the US government bond. As a result, market participants are concerned about the slowdown in the growth of the value of technology sector securities. Before the US trading session ended, the NASDAQ index declined by 2.5%, that is, to 13,533.05 points. This is followed by the S&P 500 index, which also plummeted by 0.8%, namely to 3,876.50 points. On the contrary, the Dow Jones Industrial Average increased by 0.1%, reporting to 31,521.69 points.
It should be recognized that major technology companies' shares, which traded at record highs in early February, have lost ground today. In particular, the price of securities of tech giants such as Apple, Microsoft and Amazon, fell by 2-3%. Tesla's shares in electric vehicles also drop by 8.5%.
Recently, the US government bond markets have been experiencing selloffs, which is amid investors' hopes for a quick economic recovery and faster-than-previously expected inflation and interest rate growth. The value of bonds is declining, and their yield is rising. Accordingly, the shares of popular large companies are becoming less attractive compared to risk-free assets. It can be recalled that the yield on 10-year US Treasury bonds rose from 1.344% last Friday to 1.370%. Now, if the bonds will bring investors low returns, it is possible that they will go back to stocks.
Why are the bond yields rising? Primarily, this is due to the vaccination plan against COVID-19 and positive news associated with it. Secondly, we can consider J. Biden's planned implementation of stimulus measures, with the amount of $ 1.9 trillion, to help the US economy. As we can see, everything is favoring investors – extreme optimistic news about the spread of the COVID-19, incentives and good reporting are noted. Therefore, it is not surprising that the rates are rising.
So, stock managers actively withdraw money from the shares of technology giants. These withdrawn funds will eventually flow into those sectors that are most sensitive to various economic fluctuations – in the shares of banks and oil and gas companies.
In such a case, market participants are focusing their attention on a crucial issue: How will the US Fed react to the rapid growth of government bond yields? It is known that Fed's head, Jerome Powell, will make a speech today. He is scheduled to address the Senate Banking Committee, and thus, the market is focusing on how this event will turn out.
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