Tuesday marked the start of a holiday-shortened week, and Wall Street finished lower as surging U.S. Treasury yields put pressure on mega-cap shares that are sensitive to interest rates.
The tech-heavy Nasdaq was most negatively impacted by growth stocks (.IGX). Value stocks aided the Dow to maintain nominal gains while the S&P 500 followed the Nasdaq in the red.
In contrast, industrials, utilities, and energy are prospering, according to Ryan Detrick, chief market analyst at Carson Group in Omaha, Nebraska. Higher Treasury yields are putting pressure on growth companies.
He continued, saying that this is a microcosm of what has been happening all year as money is moving away from the growth sectors and into the quality side of things.
When the high fliers return to earth, it’s critical to keep in mind that other organisations can pick up the slack, said Detrick.
After an internal schedule review indicated that the firm intends to reduce production at its Shanghai factory, shares of Tesla Inc (TSLA.O) fell 11.4%, making it the biggest weight on the S&P and the Nasdaq.
Tesla stock has dropped 69% of its worth this year as of Tuesday’s move.
Growth equities that are impacted by interest rates are under pressure in 2022 due to rising Treasury yields. Growth shares have lost nearly 30% for the year, while value equities have lost roughly 7.5% over the same time period.
All three indexes are on track to record their largest yearly loss since 2008, the lowest point of the global economic crisis, with only three trading days left in 2022.
Bonds had a worse year than stocks, which had a poor year. Detrick noted that it’s quite uncommon. It’s a regrettable reminder that markets occasionally catch you off guard.
Beijing relaxed its stringent COVID-19 restrictions, which have severely hurt the $17 trillion industry and raised expectations for a rebound in global demand and an improved supply chain.
On the economic side, the Commerce Department’s preliminary assessment of the United States’ goods trade balance indicated a reduction in the deficit of 15.6%, while S&P Case-20-city Shiller’s composite home price growth rate slowed to 8.6% year over year, the lowest level since November 2020.
The Nasdaq Composite (.IXIC) was down 144.64 points, or 1.38%, to 10,353.23 while the S&P 500 (.SPX) shed 15.57 points, or 0.40%, to 3,829.25. Meanwhile Dow Jones Industrial Average (.DJI) increased 37.63 points, or 0.11%, to 33,241.56.
Six of the 11 major S&P 500 sectors closed the day in the red, with communication services (.SPLRCL) as well as consumer discretionary (.SPLRCD) suffering the most percentage losses.
After Beijing stated it was loosening restrictions on travel, U.S.-listed shares of Chinese companies including JD.Com Inc, renowned Alibaba Group Holding Ltd, and the influential Pinduoduo Inc (PDD.O) increased by 1.4% to 4.9%.
After severe weather drove the low-cost commercial airline to outperform its competitors in cancellations, Southwest Airlines Co (LUV.N) fell. The session finished with the S&P 1500 Airlines index falling.
On the NYSE, declining issues outnumbered rising ones by a ratio of 1.18 to 1; on the Nasdaq, the ratio was 1.93 to 1.
The Nasdaq Composite registered 96 new peaks and 448 new lows, while the S&P 500 recorded 9 new 52-week peaks and 3 new lows.
8.35 billion shares were traded on U.S. exchanges, which is lower than the 11.35 billion norms for the entire session for the previous 20 trading days.
On the other hand, rising Treasury yields helped the dollar rise to a more than one-week high against the yen on Wednesday, bolstered by expectations for a robust recovery in Chinese growth as COVID-19 limitations are loosened.
The Bank of Japan continued to send out signals that the unexpected policy change it made last week wasn’t the beginning of the end for stimulus, which put pressure on the yen.
In Asian trading, the dollar gained 0.5% to 134.17 yen after earlier touching 134.40 for the first since December 20, when the BOJ unexpectedly loosened the 10-year Japanese govt bond rate policy band, sending the pair down.
