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Rising bond yields were back in focus on Tuesday, as stocks traded lower. Bank stocks rebounded from their Monday losses.
The Dow Jones Industrial Average was down 104 points, or 0.3%, in morning trading. The S&P 500 was off 0.5%, while the Nasdaq Composite lost 0.8%. The small-cap Russell 2000 index ticked up 0.6% after falling in recent sessions.
The 10-year U.S. Treasury yield was up about 0.03 percentage point, to around 1.75%, as the price of the note fell. Higher interest rates, which reflect expectations for rising inflation and faster economic growth, have accompanied rising near-term earnings estimates for cyclical and economically sensitive energy, industrial, and materials companies. But they’ve also put a dent in valuations of growth companies in sectors like technology, which expect to see the bulk of their profits come further in the future.
Tuesday’s declines were indiscriminate, however. Technology and energy were the worst-performing sectors in the S&P 500, down 1.1% and 1.4%, respectively. Financial stocks were the only group in the index that was solidly in the green on Tuesday.
That follows a big tumble from bank stocks on Monday amid the fallout from a near-$30 billion selloff linked to a margin call on Archegos Capital Management. Several global investment banks warned investors that they might see a material negative impact on their earnings as a result of the hedge fund defaulting on its margin loans.
Bank stocks largely rebounded on Tuesday, with shares of
(ticker: GS) and
(MS) each up about 1.7%. Stocks of
(CS) and
(NMR) continued to decline, however, down 4.1% and 1.9%, respectively. The broader, U.S.-focused,
(KBWB) rose 1.3%.
“For the banks involved the losses will be painful, and probably a little embarrassing, however they aren’t likely to undermine confidence in the stability of the financial system,” said Michael Hewson, an analyst at CMC Markets.
The stocks in which Archegos reportedly had held concentrated and highly levered positions also gained following their brutal selloffs over the past week.
(VIAC) stock rose 5.2%, Discovery (DISCA) jumped 8.1%,
Tencent Music Entertainment Group
(TME) added 7.6%, and Baidu (BIDU) added 6.8%.
The Archegos saga appears to be largely in the rearview mirror, without a broader fallout for other hedge funds or the banking system. Also, a container ship stuck in the Suez Canal was freed on Monday, allowing trade to again flow through the vital waterway.
“This is allowing markets to focus on President Biden’s latest plan to revive the U.S. economy—a massive wad of infrastructure spending,” said Russ Mould, an analyst at AJ Bell.
President
Joe Biden
is set to announce parts of his $3 trillion-plus infrastructure plan on Wednesday, which is also expected to address domestic manufacturing, decarbonization technologies, competition with China, and potential tax increases.
Covid-19 cases have been rising again in the U.S., as the pace of vaccinations has accelerated. Nearly all states are on track to extend eligibility to all residents before Biden’s May 1 deadline. Still, the Centers for Disease Control warned on Monday about the possibility of a dangerous “fourth wave” of the virus.
Stocks rose in Europe on Tuesday, with Germany’s DAX index trading at a record high, up 1%. The FTSE 100 in London was 0.4% higher and the CAC 40 in Paris rose 0.9%. In Asia, Tokyo’s Nikkei 225 rose 0.2% on Tuesday, while Hong Kong’s Hang Seng lifted 0.8% and the Shanghai Composite Index ticked up 0.6%.
McCormick (MKC) shares were 4.4% higher after it reported adjusted earnings of 72 cents a share, up from 54 cents a year ago and ahead of the FactSet consensus of 59 cents.
BioNTech (BNTX) stock jumped 5.1% after its Covid-19 vaccine partner
(PFE) increase its 2021 manufacturing target by about 25%. The companies now plan to deliver some 2.5 billion doses this year. Pfizer stock was down 1%.
Roku (ROKU) shares rose 0.8% after Truist upgraded the stock to Buy from Hold.
Alphabet (GOOGL), the parent company of Google, fell 0.3% even as Stifel upgraded the stock to Buy from Hold.
American Airlines (AAL) shares rose 2.2% after Jefferies upgraded the stock to Hold from Underperform.
(YELP) shares rose 4.6% after being upgraded to a Buy rating at Citi, from Neutral.
DXC Technology (DXC) stock jumped 3.9% after being upgraded to Buy, from Hold, at
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