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Market Snapshot: Dow retreats from record as rising bond-yields keep investors on edge

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U.S. stocks finished slightly lower Thursday as investors contended with higher bond yields and the threat of inflation given expectations for the the economy to recover quickly later this year.

What did major indexes do?
  • The Dow Jones Industrial Average
    DJIA,
    -0.31%

    was off 104.41 points, or 0.3%, to end at 33,066.96.
  • The S&P 500
    SPX,
    -0.32%

    fell 12.54 points, or 0.3%, to close at 3,958.55.
  • The Nasdaq Composite
    COMP,
    -0.11%

    shed 14.25 points, or 0.1%, to finish at 13,045.39.

On Monday, the Dow flipped positive in afternoon trade to end the day up 98.49 points, or 0.3%, to close at a record 33,171.37. The S&P 500 ended the session down 0.1%, while the Nasdaq Composite dropped 0.6% and the small-cap Russell 2000
RUT,
+1.72%

dropped 2.8%.

What drove the market?

A brief bout of selling in U.S. Treasurys drove activity across markets Tuesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.727%

early Tuesday traded above 1.77% for the first time since January 2020 but ended flat around 1.72%, based on Tradeweb data.

The rise in yields lifted the U.S. dollar and weighed on equities. Analysts note higher yields indicate growing fears the Federal Reserve may move faster than it has signaled if inflation rears its head, putting an end to the extremely accommodative monetary policies which have buoyed markets since the start of the pandemic.

“We are already seeing that an improving economy is leading to higher interest rates. There is also the expectation that inflation could rise as a result. Taken together, cash flow is likely to be impacted. Stocks, companies and consumers will have to adjust to these new realities, which could take time,” said Lindsey Bell, chief investment strategist for Ally Invest, in a note.

Apple
AAPL,
-1.23%

and Microsoft
MSFT,
-1.44%

were biggest losers in the Dow, down more than 1% each. Losses in the S&P 500 were led by utilities and technology stocks. However, stocks likely to benefit from reviving summer travel as the coronavirus pandemic fades saw gains. American Airlines
AAL,
+5.28%

was up 4%, while United Airlines
UAL,
+3.58%

rose 3%.

Meanwhile, investors also are pondering the impact of President Joe Biden’s infrastructure plan which is expected to cost as much as $3 trillion to $4 trillion, offset by some tax hikes. Biden is set to announce parts of his plan on Wednesday.

Read: Here’s what tax hikes could mean for the stock market as Biden pushes infrastructure plan

Investors also looked out for any further selling of stocks after a large margin call on equity derivatives held by Archegos Capital Management that forced an estimated $30 billion in blxock sales, triggering plunges in shares of media companies involved in the fund’s positions. Big bank shares were also dented due to worries about their exposure to Archegos.

Read: Here are the complex bets at the heart of ‘unprecedented’ Archegos-linked $30 billion margin call

In U.S economic data, the Case-Shiller home price index for January showed an 11% year-over-year rise.

The Conference Board’s consumer-confidence index surged in March to a one-year high at 109.7 from a revised 90.4, lifted as more Americans got vaccinated and the government doled out $1,400 stimulus checks in a boost to the economy.

Which companies were in focus?
How did other markets trade?

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