© Reuters. ARCHIVE PHOTO: An external view of the Nasdaq market place in the Manhattan neighborhood of New York City
By Shashank Nayar and Medha Singh
(Reuters) – The index fell from a record high on Thursday, while the high-tech Nasdaq fell more than 1%, with bond yields peaking at 14 months after the Federal Reserve pledged. to tolerate inflation and maintain loose monetary policy until 2023.
Yield on 10-year benchmark notes exceeded 1.75% for the first time since January 2020, putting pressure on high-growth companies, including Apple Inc (NASDAQ :), Facebook Inc (NASDAQ :), Netflix Inc (NASDAQ :), Amazon.com Inc (NASDAQ 🙂 and Microsoft Corp (NASDAQ 🙂 fell between 1.2% and 1.6%.
Technology stocks are particularly sensitive to rising yields because their value depends heavily on future earnings, which are discounted more deeply when bond returns increase.
The Dow blue chip hit another record the day after the Fed projected the strongest growth in nearly 40 years, with the end of the COVID-19 crisis, and repeated its promise to keep its interest rate target close to zero for the next few years. years old.
Opinions among the Fed’s 18 current legislators have changed slightly, with four now hoping that rates will need to rise next year and seven seeing an increase in rates in 2023.
“It is a slight increase in the thinking of policymakers that there may be an earlier movement that is really fueling the bond market crash and raising yields,” said Fiona Cincotta, senior financial analyst at Gain Capital, London .
While inflation is expected to exceed the Fed’s 2.0% target for 2.4% this year, Fed Chairman Jerome Powell sees this as a temporary increase that will not change the central bank’s stance.
A $ 1.9 trillion spending stimulus raised fears of rising inflation, which triggered a jump in the Treasury’s longer yields, accelerating a rotation in value stocks at the expense of high-growth technology stocks.
Economic data was mixed on Thursday, with one showing that the number of US unemployment claims has increased unexpectedly in the past week. A separate report indicated that the Philly Fed business index has jumped more than expected to its highest level since 1973.
“If economic data is better than expected before stimulus checks reach the accounts and the reopening is fully in place, the economy will get hotter from there,” added Cincotta.
At 10:04 ET, the fell 12.72 points, or 0.04%, to 33,002.65, the S&P 500 lost 24.55 points, or 0.62%, to 3,949.57 and lost 205.08 points, or 1 , 52%, to 13,320.12.
Bank shares, sensitive to economic prospects, jumped about 2.4%, while sectors that should benefit the most from the reopening of the economy, including financial and industrial, hovered close to their historic highs.
In corporate news, Accenture (NYSE 🙂 jumped about 5% after the IT consulting firm raised its revenue forecast for the entire year and reported second quarter revenue above analysts’ estimates as more companies used their digital services to move operations to the cloud.
Dollar General Corp (NYSE 🙂 fell 4.5% after the company forecast annual same-store sales and below-estimated earnings, indicating that the pandemic-driven race for cheaper food was slowing faster than expected.
So-called meme stock AMC Entertainment (NYSE 🙂 rose 2.6% after the cinema operator said it would have 98% of its US branches open from Friday.
The declining problems outnumbered the advanced ones by 1.9 to 1 on the NYSE and Nasdaq.
The S&P 500 recorded 44 new 52-week highs and no new lows, while the Nasdaq recorded 118 new highs and 22 new lows.