rainn.png
Tuesday June 22nd, 2021 6:29AM

Stocks rise, reversing tech-driven slide; bond yields climb

By The Associated Press

A late-afternoon burst of buying sent stocks higher on Wall Street Tuesday, reversing most of a sell-off led by technology companies.

The S&P 500 index was up 0.4% as of 3:38 p.m. Eastern after being down more than 1.8% earlier. The technology-heavy Nasdaq was down 0.2% after being down 3.9% earlier. The Dow Jones Industrial Average, which is less exposed to tech stocks than the two other indexes, was up 113 points, or 0.4%, to 31,627.

Facebook, Disney, Netflix and other communications stocks helped drive the market's comeback from a sell-off in the big tech companies that had pushed the market significantly higher the past year: Apple, Amazon, Microsoft and Tesla.

Since the pandemic began, investors consistently pushed the prices of these companies' stocks to stratospheric heights, betting that quarantined consumers would do most of their shopping online and spend money on devices and services for entertainment.

The bet mostly paid off, as big tech companies reported big profits last year. But the pandemic may be reaching its end stages, with millions of vaccines being administered each week in the U.S. and across the globe now. It may cause consumers to return to their pre-pandemic habits.

By late afternoon, however, those tech stocks had erased most if not all of their losses from earlier in the day. Apple rose 0.1%, Microsoft fell 0.3%, Amazon gained 0.3% and Tesla was down just 0.7% after having been down 13.4% earlier. The electric car maker is the second-most heavily weighted stock in the consumer discretionary sector after Amazon.

Investors remain increasingly focused on a big tick up in bond yields and how it affects stock valuations. The yield on the 10-year Treasury note rose to 1.36%, continuing its quick climb up over the last few weeks.

When bond yields rise, stock prices tend to be negatively impacted because investors turn an increasingly larger portion of their money toward the higher, steadier stream of income that bonds provide.

“If you have a 10-year (Treasury yield) which returns something, then all of a sudden you get this situation where investors may want more of a risk-free asset and rotate out of equities,” said Sylvia Jablonski, chief investment officer at Defiance ETFs.

While eventually bond yields impact big dividend-paying stocks like consumer staples, utilities and real estate, it does tend to impact stocks that have big valuations like technology stocks much earlier. Tech stocks tend to have higher-than-average price-to-earnings ratios, which values a stock on how much the company earns in in profits each year versus its stock price. The S&P 500 index is currently trading at a price-to-earnings ratio of 32, historically high by any measurement, while the price-to-earnings ratio of a company like Amazon is north of 75.

Jablonski expects the sell-off in technology stocks, which have fallen five days straight, will be short-lived, though she adds that a further increase in the 10-year Treasury yield could be “a different story.”

“The 10-year was sort of the news of the week that took some of the fire out of equities, but I wouldn’t be surprised that investors looking for entry points are going to get back in at these levels,” she said. "Stocks still have a future that looks to me to be a lot brighter than the value investors are going to get if they convert to bonds.”

More broadly, investors remain focused on the future of global economies badly hit by COVID-19 and the potential for more stimulus to fix them. The U.S. House of Representatives is likely to vote on President Joe Biden’s proposed stimulus package by the end of the week. It would include $1,400 checks to most Americans, additional payments for children, and billions of dollars in aid to state and local governments as well as additional aid to businesses impacted by the pandemic.

The large amount of stimulus being pumped into the economy has given some investors pause, reviving worries about inflation that have been nearly nonexistent for more than a decade. The inflation worries have been a big driver of why bond yields have risen.

“Overall, the view is this rise in yields is just a reflection of confidence in economy and the vaccine rollout,” said Leslie Falconio, senior strategist at UBS Global Wealth Management.

“Right now, this rise in yields, given the fact that financial conditions are still loose, is not a red flag,” she said. “As long as growth supports the rise in interest rates, then that’s not a concern.”

Federal Reserve Chair Jay Powell speaks to Congress on Tuesday and Wednesday as part of his regularly schedule updated for lawmakers. Powell said the Fed didn't see a need to alter its policy of keeping interest rates ultra-low, noting that the economic recovery “remains uneven and far from complete.”

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Financial Markets
© Copyright 2021 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
South Dakota House moves to impeach AG after fatal crash
South Dakota House lawmakers have begun impeachment proceedings against the state’s attorney general, who is facing misdemeanor charges for striking and killing a man with his car
4:21PM ( 2 minutes ago )
White House promises vaccine help as states rush to catch up
States are scrambling to catch up on coronavirus vaccinations after bad weather last week led to clinic closures and shipment backlogs
4:06PM ( 17 minutes ago )
Indian Country gripped by Haaland hearing for top US post
For Native Americans, Deb Haaland is more than an elected official on track to become the first Indigenous secretary of the Interior Department
4:00PM ( 23 minutes ago )
Associated Press (AP)
Interior nominee Haaland questioned on drilling, pipelines
President Joe Biden’s nominee to head the Interior Department faced sharp questions from Republicans Tuesday over what several called her “radical” ideas that include opposition to fracking and the Keystone XL oil pipeline
3:37PM ( 46 minutes ago )
HHS pick says pandemic is top job, but agenda is broader
Health secretary nominee Xavier Becerra is telling senators that the coronavirus pandemic will be his first priority if confirmed, but he's also pledging to expand health insurance, rein in prescription drug costs and reduce racial and ethnic disparities in medical care
3:25PM ( 58 minutes ago )
The Latest: Biden administration to send millions of masks
President Joe Biden says the administration expects to send millions of masks to people around the country “very shortly.”
3:22PM ( 1 hour ago )
AP Business
World Bank threatens to suspend vaccine funding to Lebanon
The World Bank has threatened to suspend financing for coronavirus vaccines in Lebanon over violations by members of parliament and others it said were inoculated without registering in advance
1:20PM ( 3 hours ago )
Fed's Powell: Recovery incomplete, high inflation unlikely
Federal Reserve Chair Jerome Powell underscored the U.S. economy’s ongoing weakness Tuesday in remarks that suggested that the Fed sees no need to alter its ultra-low interest rate policies anytime soon
1:13PM ( 3 hours ago )
The Latest: States to get 14.5M doses of vaccine this week
States will receive about 14.5 million doses of the coronavirus vaccine this week, marking a nearly 70% increase in distribution of doses over the last month
12:50PM ( 3 hours ago )
AP Business - Economy
Big decline in technology stocks pulls broader market lower
A massive decline in technology stocks was dragging the broader market lower in early trading Tuesday, as investors remain increasingly focused on a big tick up in bond yields and what it means for the overall market
10:15AM ( 6 hours ago )
World Bank might suspend financing of vaccines to Lebanon
The World Bank has threatened to suspend financing for coronavirus vaccines in Lebanon over violations by members of parliament and others it said were inoculated without registering in advance
10:07AM ( 6 hours ago )
Technology companies slump again, leading stock market lower
Stocks of big technology companies are falling again in early trading on Wall Street, leading the overall market lower
9:41AM ( 6 hours ago )
AP Business - Financial Markets
South Dakota House moves to impeach AG after fatal crash
South Dakota House lawmakers have begun impeachment proceedings against the state’s attorney general, who is facing misdemeanor charges for striking and killing a man with his car
4:21PM ( 2 minutes ago )
White House promises vaccine help as states rush to catch up
States are scrambling to catch up on coronavirus vaccinations after bad weather last week led to clinic closures and shipment backlogs
4:06PM ( 17 minutes ago )
Indian Country gripped by Haaland hearing for top US post
For Native Americans, Deb Haaland is more than an elected official on track to become the first Indigenous secretary of the Interior Department
4:00PM ( 23 minutes ago )
Capitol defenders blame bad intelligence for deadly breach
Officials who were in charge of Capitol security at the time of last month's riot have testified that faulty intelligence was to blame for the failure to anticipate the violent mob
3:54PM ( 29 minutes ago )
Diplomatic doses: Israel shares vaccines with allied nations
After jumping out to a quick start in its vaccination campaign, Israel says it is sharing a small surplus of its coronavirus vaccines with several friendly countries
3:51PM ( 32 minutes ago )