Technology companies are leading stocks lower on Wall Street in afternoon trading Wednesday as another rise in bond yields rattles investors.
The S&P 500 was down 0.7% as of 3:05 p.m. Eastern time, shedding an early gain. The benchmark index is on track for its second straight loss after clocking its best day in nine months on Monday. Technology companies bore the brunt of the selling, pulling the S&P 500’s tech sector down 2.1%. Microsoft and Apple were both down more than 2%.
Bond yields were headed higher after easing a day earlier. The yield on the benchmark 10-year Treasury note rose to 1.47% from 1.41%.
When bond yields rise quickly, as they have in recent weeks, that forces Wall Street to rethink the value of stocks, making each $1 of profit that companies earn a little less valuable. Technology stocks are most vulnerable to this reassessment, in large part because their recent dominance left them looking even pricier than the rest of the market.
On the flipside, banks benefit when bond yields rise, because it allows them to charge higher rates on mortgages and many other kinds of loans. Financial sector stocks were bucking the broader market slide. JPMorgan Chase, Bank of America and Wells Fargo were up more than 2%.
“The good news to remember is there are other groups taking the baton,” said Ryan Detrick, chief investment strategist for LPL Financial, referring to banks and energy companies benefiting from higher rates, even as tech stocks take a hit.
The Dow Jones Industrial Average wavered between small gains and losses. It was up 63 points, or 0.2%, to 31,454. The technology-heavy Nasdaq was down 2.1%.
Wall Street continues to look to Washington, where economic data, comments out of the Federal Reserve and President Joe Biden’s stimulus package remain front and center. Treasury yields hit the psychologically important 1.50% mark last week as investors braced for stronger economic growth but also a possible increase in inflation.
“Some higher inflation at the beginning of a new economic expansion is perfectly normal,” Detrick said.
Despite the rollout of millions of doses of coronavirus vaccines weekly, the U.S. economy continues to struggle. Payroll processor ADP released a report Wednesday showing that private employers created only 117,000 jobs in February, far below economists’ forecasts.
On Tuesday, Federal Reserve Governor Lael Brainard sought to calm financial markets by emphasizing that the Fed, while generally optimistic about the economy, is still far from raising interest rates or reducing its $120 billion a month in asset purchases.
Federal Reserve Chair Jay Powell will speak Thursday on monetary policy as well. Investors heard from him last week when he testified in front of Congress, but the format — a question-and-answer session with The Wall Street Journal — is likely to be more illuminating than Powell’s calculated answers to politicians.
The big piece of data investors will get will be the February jobs report on Friday. Economists surveyed by FactSet expect employers created 225,000 jobs last month, but with the disappointing economic data, investors are likely to dampen their outlooks. The report also includes numbers for how much wages are rising across the economy, a key component of inflation.
Las Vegas Sands climbed 2% after the casino and resort operator announced it would sell its Las Vegas properties to a private equity firm. The company, which will drop “Las Vegas” from its name, will focus on its holdings in Asia.
Google’s parent company fell 2.7% after saying it would stop using customers’ Internet browsing data to target and sell ads starting next year, responding to years of criticism from privacy advocates who have said the company is too invasive into its users’ personal lives.