U.S. stocks edged lower Tuesday as investors contended with threat of inflation and higher bond yields, precipitated by expectations for the economy to recover quickly later this year.
What are major indexes doing?
The Dow Jones Industrial Average
was off 121 points, or 0.4%, at 33,051.
The S&P 500
was off 16 points, or 0.4%, at 3,955.
The Nasdaq Composite
shed 35 points, or 0.3%, to trade at 13,024.
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
What’s driving the market?
A brief bout of selling in U.S. Treasurys drove activity across markets Tuesday. The yield on the 10-year Treasury note
early Tuesday traded above 1.77% for the first time since January 2020 and remained up a basis point to around 1.73%, based on Tradeweb data.
Rising yields were lifting the U.S. dollar and weighing on technology stocks and shares of companies with fast revenue or earnings growth. Technology and growth stocks are more sensitive to rising bond yields as the current value of their future earnings growth is hurt by the higher discount rate implied by rising bond yields.
Moreover, higher yields have indicated 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.
Meanwhile, investors 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.
Investors were also on the lookout 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 block 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.
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 are in focus?
Shares of ViacomCBS Inc.
were up more than 6% after falling nearly 7% Monday and suffering steep losses last week in moves tied to the Archegos liquidation.
Shares of Goldman Sachs Group Inc.
rose 2% and Morgan Stanley
gained 1.6%. The banks moved large blocks of assets before other large banks that lended to Archegos Capital Management, as the scale of the hedge fund’s losses became apparent, according to The Wall Street Journal, helping to limit their losses amid the stock liquidation.
PayPal Holdings Inc.
shares were off 0.1% after the payments company said it would start letting U.S. customers purchase items with cryptocurrencies.
Shares of videogame-retailer GameStop Corp.
rose 4.7% after it announced the appointment Tuesday of former Amazon executive Elliott Wilke to the role of chief growth officer effective April 5. Wilke has held a range of roles at Amazon in branding, consumer goods and e-commerce, in segments including Amazon Fresh, Prime Pantry and Worldwide Private Brands.
How are other markets trading?
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.4%.
Oil futures were under pressure as the Suez Canal reopened to traffic and traders turned their attention to this week’s OPEC+ meeting, with the U.S. benchmark
down 1.9% at $60.42 a barrel.
Gold futures were under pressure as Treasury yields and the dollar rose, with the June contract
down 1.7% at $1,684.80 an ounce.
In Europe, the Stoxx 600 index
rose 0.8% and London’s FTSE 100
In Asia, the Shanghai Composite
rose 0.6%, while Hong Kong’s Hang Seng Index
rose 0.8% and Japan’s Nikkei 225
was up 0.2%.