Nasdaq tumbles 3% as soaring yields hit tech shares, S&P 500 closes 1.5% lower
Technology shares led the U.S. stock market lower on Thursday as a spike in bond yields fueled concern about equity valuations and prompted investors to sell growth-focused high flyers.
The Nasdaq Composite dropped 3% to 13,116.17 for its worst day since Feb. 25 as Apple, Amazon and Netflix all fell more than 3%. Tesla slipped nearly 7%.
The S&P 500 slid 1.5% to 3,915.46, falling from a record closing high reached in the previous session.
The Dow Jones Industrial Average fell 153.07 points, or 0.5%, to 32,862.30 after hitting a new intraday record earlier in the day amid a rally in bank stocks.
The 10-year Treasury yield jumped 11 basis points above 1.75% at its session high, reaching its highest level since January 2020. The 30-year rate also climbed 6 basis points at one point, breaching the 2.5% level for the first time since August 2019. The jump in bond yields came after the Federal Reserve expressed its willingness to allow an overshoot in inflation. Rising rates can have an outsized impact on growth stocks as they make their future returns less valuable today.
Bank stocks outperformed as higher interest rates tend to improve their profit margins. Banks can earn more from the widening gap between the rate they borrow at in the short term and the rate they lend out at in the long term. U.S. Bancorp and Wells Fargo popped 3.3% and 2.4%, respectively. JPMorgan jumped 1.7%, while Bank of America gained 2.6%.
Investors also digested a mixed bag of economic data Thursday. Weekly initial jobless claims totaled 770,000 for the week ended March 13, worse than an estimate of 700,000, according to economists polled by Dow Jones.
Meanwhile, the Philadelphia Federal Reserve’s manufacturing index showed a reading of 51.8, well exceeding Dow Jones consensus of 22.0 and hitting the highest level for the gauge since 1973.
The energy sector was the biggest loser with a 4.7% decline Thursday amid a drop in oil prices. WTI crude futures slid more than 7% to $60 per barrel, falling for a fifth straight day and suffering its worst day since September.
Reference: CNBC
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