THE S&P 500 and Nasdaq ended down on Monday as climbing Treasury yields and prospects of rising inflation triggered valuation concerns, hitting shares of high-flying growth companies.
Nevertheless, the Dow index ended slightly higher, boosted by a 4% surge in Walt Disney Co shares.
The Dow Jones Industrial Average ended 27.37 points or 0.09% higher to 31,521.69, the S&P 500 lost 30.21 points or 0.77% to 3,876.5 and the Nasdaq Composite dropped 341.42 points or 2.46%, to 13,533.05.
Still, some analysts noted that the stocks pullback was expected after a torrid rally this year and in 2020.
“This is a small pullback primarily because stocks got a little overheated and there are a few worries out there that people are making mountains out of molehills,” said Brian Reynolds, chief market strategist, at Reynolds Strategy.
He cited worries about the rise in Treasury yields, but noted that junk bond yields hit all-time lows last week, suggesting there has been a shift from the safety of Treasuries to the riskiness of corporates among investors.
US benchmark 10-year Treasury yields were up at 1.363%. Since the beginning of February, 10-year yields have risen about 26 basis points, on track for their largest monthly gain in three years.
“That’s bullish for stocks,” he added.
Federal Reserve Chair Jerome Powell is scheduled to speak before the Senate Banking Committee on Tuesday with investors expecting to look for any potential changes to the central bank’s dovish outlook.
Shares of Apple Inc, Microsoft Corp, Alphabet Inc, Tesla Inc and Amazon.com Inc resumed their slide from the previous week, falling between 0.9% and 5%.
Largely upbeat fourth-quarter earnings had powered Wall Street’s main indexes to record highs early last week, but the rally lost steam, in part due to fears of a potential snag in US vaccination efforts and inflation concerns emanating from stimulus measures.
The last time the Dow ended higher, while the Nasdaq fell more than 2.4% was May 29, 2001.
The S&P 500 declined for five straight sessions, its longest such streak in a year.
Declining issues outnumbered advancing ones on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.63-to-1 ratio favoured decliners.
The S&P 500 posted 71 new 52-week highs and no new lows; the Nasdaq Composite recorded 268 new highs and 15 new lows.
Volume on US exchanges was 14.38 billion shares compared with the 16.05 billion average for the full session over the last 20 trading days. – Feb 23, 2021
