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Wall Street closed sharply lower in a choppy session on Thursday, dragged down by mega-cap tech stocks. Treasury yields rose after an auction of 30-year bonds saw weak demand. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) declined 0.7% or 249.13 points to close at 33,699.88. Twenty-five components of the 30-stock index ended in negative territory, while five ended in positive.
The S&P 500 fell 0.9% or 36.36 points to close at 4,081.50. All the 11 broad sectors of the benchmark index ended in negative territory. The Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB) and the Utilities Select Sector SPDR (XLU) slid 2.2%, 1.5% and 1.4%, respectively.
The tech-heavy Nasdaq dropped 1% or 120.94 points to finish at 11,789.58.
The fear-gauge CBOE Volatility Index (VIX) was up 5.5% to 20.71. A total of 11.5 billion shares were traded on Thursday, lower than the last 20-session average of 11.9 million. Decliners outnumbered advancers on the NYSE by a 2.74-to-1 ratio. On the Nasdaq, a 2.37-to-1 ratio favored declining issues.
Yields Rise on Weak 30-Year Bond Auction
The yield on the benchmark 10-year Treasury note rose to a one-month high, and on the 2-year note rose to levels not seen since last November after weak buy-side demand marked the auction of a $21 billion 30-year bond auction on Thursday.
After a strong 10-year bond auction on the day before, the 30-year bond sold at a high yield of 3.686%, approximately 3 basis points higher than where they had traded before the auction, thereby weakening demand. This is being seen as a market reaction to the recent slew of data showing a robust labor market, adding fuel to the theory that the Fed will continue to raise interest rates and might not be able to achieve a soft landing of the economy.
The yield on the 2-year treasury note rose 5.5 basis points to 4.507%, while the yield on the benchmark 10-year treasury note advanced 4.7 basis points to 3.682. The treasury curve, which is the spread between 2-year and 10-year Treasury yields, narrowly missed closing the session with the most negative reading since October 1981.
Rise in treasury yields and a widening in the inversion of a treasury curve generally make mega-cap growth stocks like tech stocks look currently overvalued in relation to their future prospects, and market participants rush to the safety of the bond market. With a probable recession on the horizon, tech stocks have been suffering the most in recent sessions. Thursday’s bond market movement simply added to the woes of growth stocks.
The Labor Department said on Thursday that initial jobless claims rose to 196,000, increasing 13,000 for the week ending Feb 4, from the previous week's unrevised level. The four-week moving average decreased to 189,250, marking a fall of 2500 from the previous week’s unrevised average of 191,750.
Continuing claims came in at 1,688,000 for the week ending Jan 28, increasing 38,000 from the previous week’s revised level. The previous week's numbers were revised down by 5,000 from 1,655,000 to 1,650,000. The 4-week moving average came in at 1,664,750, an increase of 14,500 from the previous week's revised average. The previous week's average was revised down by 1,250 from 1,651,500 to 1,650,250.
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Stock Market News for Feb 10, 2023
Wall Street closed sharply lower in a choppy session on Thursday, dragged down by mega-cap tech stocks. Treasury yields rose after an auction of 30-year bonds saw weak demand. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) declined 0.7% or 249.13 points to close at 33,699.88. Twenty-five components of the 30-stock index ended in negative territory, while five ended in positive.
The S&P 500 fell 0.9% or 36.36 points to close at 4,081.50. All the 11 broad sectors of the benchmark index ended in negative territory. The Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB) and the Utilities Select Sector SPDR (XLU) slid 2.2%, 1.5% and 1.4%, respectively.
The tech-heavy Nasdaq dropped 1% or 120.94 points to finish at 11,789.58.
The fear-gauge CBOE Volatility Index (VIX) was up 5.5% to 20.71. A total of 11.5 billion shares were traded on Thursday, lower than the last 20-session average of 11.9 million. Decliners outnumbered advancers on the NYSE by a 2.74-to-1 ratio. On the Nasdaq, a 2.37-to-1 ratio favored declining issues.
Yields Rise on Weak 30-Year Bond Auction
The yield on the benchmark 10-year Treasury note rose to a one-month high, and on the 2-year note rose to levels not seen since last November after weak buy-side demand marked the auction of a $21 billion 30-year bond auction on Thursday.
After a strong 10-year bond auction on the day before, the 30-year bond sold at a high yield of 3.686%, approximately 3 basis points higher than where they had traded before the auction, thereby weakening demand. This is being seen as a market reaction to the recent slew of data showing a robust labor market, adding fuel to the theory that the Fed will continue to raise interest rates and might not be able to achieve a soft landing of the economy.
The yield on the 2-year treasury note rose 5.5 basis points to 4.507%, while the yield on the benchmark 10-year treasury note advanced 4.7 basis points to 3.682. The treasury curve, which is the spread between 2-year and 10-year Treasury yields, narrowly missed closing the session with the most negative reading since October 1981.
Rise in treasury yields and a widening in the inversion of a treasury curve generally make mega-cap growth stocks like tech stocks look currently overvalued in relation to their future prospects, and market participants rush to the safety of the bond market. With a probable recession on the horizon, tech stocks have been suffering the most in recent sessions. Thursday’s bond market movement simply added to the woes of growth stocks.
Consequently, shares of Meta Platforms, Inc. (META - Free Report) and Amazon.com, Inc. (AMZN - Free Report) fell 3% and 1.8%, respectively. Meta carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Labor Department said on Thursday that initial jobless claims rose to 196,000, increasing 13,000 for the week ending Feb 4, from the previous week's unrevised level. The four-week moving average decreased to 189,250, marking a fall of 2500 from the previous week’s unrevised average of 191,750.
Continuing claims came in at 1,688,000 for the week ending Jan 28, increasing 38,000 from the previous week’s revised level. The previous week's numbers were revised down by 5,000 from 1,655,000 to 1,650,000. The 4-week moving average came in at 1,664,750, an increase of 14,500 from the previous week's revised average. The previous week's average was revised down by 1,250 from 1,651,500 to 1,650,250.