Stock market today: tech stocks fell as bond yields rose and Bitcoin fell
Tech stocks sold off again as bond yields soared on Friday after the December jobs report was released. Markets remain confident that the Federal Reserve will act quickly enough to raise interest rates.
Dow Jones Industrial Average
was mostly flat and closed in just 5 points, after the index fell 170 points on Thursday. the
slipped 0.4%, while heavy tech
The United States created 199,000 jobs in December, missing the estimate of 422,000 and down from November’s result of 210,000. The unemployment rate fell to 3.9%. “The drop in the unemployment rate is the last piece of data we need to change our baseline scenario to a rate take-off in March (rather than June),” wrote Andrew Hollenhorst, economist at Citigroup.
Any force markets can detect in the labor market could mean the Fed will be forced to raise interest rates sooner rather than later, with more people earning and spending money, contributing to high inflation.
This strength in the labor market can be seen in Friday’s report. “Today’s nonfarm payroll report required a good review of all the numbers and not just the missed headlines,” wrote Edward Moya, senior market analyst at Oanda.
That sent the 10-year Treasury yield, which forecasts long-term inflation, to as high as 1.8%, before settling at 1.77%, a new pandemic-era high. The 2-year Treasury yield, whose movements often attempt to predict the number of rate hikes to come, fell from 0.87% to 0.9% after the report was released. It closed at 0.87%.
Rising long-term bond yields are hurting tech stocks, which have recently performed poorly relative to the broader market. The Nasdaq is down about 7% from its all-time high, which the index hit at the end of November. And since that point the S&P 500 has been essentially flat. Many fast-growing tech companies are investing heavily now to generate large profits in the future, and higher long-term bond yields reduce the value of future profits.
The image of technology now looks even darker. At less than 15,000 points, the Nasdaq is trading below the level that had previously attracted buyers since October. Those buyers seemed less interested on Friday, and that’s no surprise given the 10-year rate spike.
The Dow Jones, home to more economically sensitive stocks, had a good Friday. And while the Fed’s tightening of policy is inherently bad for economic growth, investors are still not very worried, with the Dow Jones falling just over 1% from its all-time high.
Even before the jobs report was released, the Fed said in its December report released on Wednesday that it would likely hike rates in June, although markets are expecting a first hike in March. The Fed is also planning to reduce the size of its balance sheet in the near future, which could lead to the sale of bonds. This would lower bond prices, raising their interest rates.
And then came the December jobs report, which was louder than the headline would suggest.
The results of the October and November work have been revised upwards by a total of 141,000. And the December report is no exception. “We remind investors that the monthly employment figures are subject to revisions in the coming months,” wrote Jay Pestrichelli, CEO of ZEGA Financial.
It’s just the title number. The household survey, which includes those who work for themselves or have no formal job, indicated that those without a job fell by 483,000.
In reality, the jobs report was “a huge beat no matter how you look at it,” said Tom Graff, head of fixed income at Brown Advisory.
In addition, wages in the private sector have continued to rise. This means that households have more money to spend and businesses have a greater incentive to raise prices, which contributes to inflation.
No wonder bond yields are rising and the stock market is taking notice.
Abroad, in London
was up 0.5%, and that of Hong Kong
Hang Seng Index
jumped 1.8% amid investor optimism that China would prioritize a stable economy.
Cryptocurrencies continued to lag, deepening losses after a collapse this week.
the main digital asset, fell 2.6% to less than $ 42,000, after starting the week around $ 47,000. Smaller pair
fell 5.5% from more than $ 3,800 on Monday.
Here are five stocks in motion on Friday:
(ticker: GME) climbed 7.3% as the company’s plans to expand into digital assets took shape. The retailer creates a division for cryptocurrency partnerships, while creating an NFT marketplace, Barron reported.
Share (DAL) rose 3.5% after upgrading to Buy from Neutral at Bank of America.
(HON) stock rose 2.3% after being upgraded to Buy from Neutral at UBS.
The stock (MCK) rose 2.1% after being outperformed to Neutral at Credit Suisse.
The stock (KSS) fell 1.7% after being demoted to Sell Neutral at UBS.