The Dow Jones Industrial Average swung wildly Friday to close near its session low as Wall Street struggled to shake off fears of rapidly rising rates.
The blue-chip benchmark ended the volatile session 469.64 points, or 1.5%, to 30,932.37 after trading in the green earlier. The S&P 500 fell 0.5% to 3,811.15 as energy and financial stocks pulled back. The Nasdaq Composite ended the day 0.6% higher at 13,192.34 as Big Tech names rebounded after a large sell-off in the previous session amid surging bond yields. Facebook, Microsoft and Amazon each rose more than 1%. The tech-heavy benchmark gyrated in Friday’s session where it jumped 1.9% at its high and fell as much as 0.7%.
All three major averages posted weekly losses as fears of higher interest rates and inflation deepened. The S&P 500 slid 2.5% this week for its second negative week in a row. The 30-stock Dow fell 1.8%, and the Nasdaq was the relative underperformer this week, losing 4.9%.
The weakness in the broader market came even after the personal consumption expenditures price index indicated subdued inflation in January. The PCE index, which the Federal Reserve watches closely, rose 0.3% for the month, slightly ahead of the 0.2% expectation but was up just 1.5% year over year, matching Dow Jones estimates.
The 10-year Treasury yield fell 10 basis points to around 1.42% Friday, after surging above 1.6% at one point on Thursday. Treasury yields initially fell following the inflation data release, but they bounced higher, triggering the intraday slump in major indexes. Even as they ended the day much lower, stocks failed to shake off the fears that higher rates may halt the equity rally.
Despite this week’s weakness, the equity benchmarks all finished February with modest gains. The S&P 500 and the Dow climbed 2.6% and 3.2%, respectively, posting their third positive month in four. The tech-heavy benchmark gained 0.9% this month.
Economists and investment managers say the bond market is reacting to positive economics as vaccines are rolled out and GDP forecasts improve, which should benefit corporate profits. But the move could also signal faster-than-expected inflation ahead.
“If the market begins to believe that the Fed has somehow lost control of where the bond market is going, all that idea of a taper tantrum will show up,” Art Cashin, director of floor operations at UBS, said Friday on CNBC’s “Squawk on the Street.”
Investors are shifting money into so-called reopening trades, buying the stock of companies that would benefit most from the vaccine rollout and a return to regular travel and dining trends.
Energy gained 4.3% this week, bringing its February gains to more than 21%. Energy is the biggest winner by far amid expectations that consumers around the world will soon be driving and flying as they were prior to the Covid-19 pandemic. Financials also jumped 11% this month, benefitting from rising interest rates.
Dow futures rise more than 150 points ahead of first trading day of March
U.S. stock futures rose in overnight trading on Sunday, pointing to a strong open on the first trading day of March.
Dow futures rose 175 points. S&P 500 futures gained 0.7% and Nasdaq 100 futures rose 0.7%.
Boosting sentiment on the vaccine front, the Centers for Disease Control and Prevention advisory panel voted unanimously Sunday to recommend the use of Johnson & Johnson’s one-shot Covid-19 vaccine for people 18 years of age and older. The company expects to ship out 4 millions of doses initially.
Reference: CNBC
Thai
Eng