The New York Stock Exchange traded in loose order on Thursday as bond yields climbed to a 14-month high, despite the Fed’s dovish speech the day before.
Around 15:15 HRS. WAT, the Nasdaq, which concentrates on technology stocks and is the second largest stock exchange by market capitalisation, fell 1.71% to 13.293.97 points.
The S&P 500, which houses the world’s top 500 companies, lost ground after its all time record high on Wednesday, losing 0.7% to 3,945.63 points.
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The Dow Jones index, one of the oldest equity indices around, climbed 0.06% to 33,034.61 points, after hitting a record the day before as the Central Bank once again assured that it was maintaining its monetary policy of low interest rates to support the economy.
But at the same time, the Federal Reserve Board’s Open Market Committee has sharply raised its forecast for US GDP growth to 6.5% for 2021 with inflation which will temporarily project, according to them, to 2.4%.
“Although the Federal Reserve said on Wednesday that rates would likely remain intact until 2023, markets weakened early in the session while yields on 10-year Treasuries peak for 14 months,” said analysts at multinational financial services company, Charles Shwab.
These rates, which influence those of business and real estate loans, exceeded 1.74% Thursday at the opening of Wall Street, a peak since January 2020.
“There are fears that the Fed may lose control of the yield curve and it is information technology stocks and growth-oriented stocks that are under the selling pressure,” Schwab added.
For investors, these tech groups are sensitive to rising rates and inflation because it erodes their future profits and increases their investment needs, with a typical example being Tesla, who have reported record revenues since their inception but only one year-end profit return.
A disappointing employment indicator also caught the market’s attention.
Weekly jobless claims have risen, contradicting estimates by analysts who expected a drop as activity restriction measures were relaxed in the country due to a drop in Covid-19 infections.
For the week ended March 13, 770,000 requests were recorded, over 45,000 more than the 710,000 expected by analysts.
This also resonated with the cases in Nigeria, as the country witnessed an increase of 6 percent in unemployment rate in the last three months of the year to 33.3 percent, as against the 27.1 percent reported in second quarter, the last National of Bureau statistics reveal.
It was not all gloom however, as there are positive signs of a pickup in manufacturing activity this month. The Philadelphia area activity index accelerated dramatically to its highest level in nearly 50 years ,climbing to 51.8 points in March from 23.1 points in February.
Of the eleven sectors of the S&P 500, only four were in the green, starting with banks which were benefiting from a rising interest rate environment.
The rest fell, including information technologies (-1.60%), the energy sector (-1.21%) and real estate (-0.72%), which has proven sensitive to the rise in rates.
Among the big names in tech, Apple lost more than 2%, Tesla more than 3% and Amazon -1.76%.
Lordstown, which is developing an electric pickup, fell almost 10% after it said it was under SEC investigation following a report by investment firm Hinderburg accusing it of presenting misleading information.
Bitcoin On Opposite Curve
The world’s most valuable monetary asset, Bitcoin, however rose by 8.3 percent in respect to Wednesday’s value to nestle at $60,074.37 before quickly retreating.
The coin has been traded so ferociously that only 2.3 million Bitcoin is left on exchanges, the lowest since July 2018.
The market cap of the digital currency surpassed 1.12 trillion dollars while the global crypto market cap stood at 1.8 trillion dollars.
This would mark the second time in history that Bitcoin has crossed the $60,000 threshold, having shattered the ceiling five days ago. The all time high is capped at $61,232.81 on digital currency specialists, Coindesk.
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