Nasdaq and growth stocks take it on the chin
03-Mar-21 16:20 ET
Dow -121.43 at 31270.09, Nasdaq -361.04 at 12997.77, S&P -50.57 at 3819.72
briefing.com
[BRIEFING.COM] The S&P 500 fell 1.3% on Wednesday, as the growth stocks continued to face valuation-oriented and rotational headwinds amid a rise in long-term interest rates. The Nasdaq Composite (-2.7%), which has greater exposure to these names, dropped 2.7%. The Russell 2000 declined 1.1%, and the Dow Jones Industrial Average declined 0.4%.
Long-term interest rates moved higher partly due to lingering growth optimism and pestering inflation concerns. The 10-yr yield rose six basis points to 1.47%, although it settled below its intraday high of 1.50% and well below last week's high of 1.61%. The 2-yr yield increased two basis points to 0.14%. The U.S. Dollar Index increased 0.2% to 90.96.
Growth optimism was linked to new expectations from the Biden administration to have vaccines available for every adult by the end of May, versus prior guidance of July. Inflation concerns stemmed from the February ISM Non-Manufacturing Index showing the Prices Index rise to 71.8% from 64.2% in January.
As it pertained to stocks, the higher rates worked against the growth stocks within the S&P 500 information technology (-2.5%), consumer discretionary (-2.4%), and communication services (-1.6%) sectors. The Philadelphia Semiconductor Index fell 3.1%, the Vanguard Mega Cap Growth ETF (MGK 199.71, -5.32, -2.6%) fell 2.6%, and the ARK Innovation ETF (ARKK 125.11, -8.40, -6.3%) fell 6.3%.
On the flip side, the gains in the cyclical energy (+1.5%), financials (+0.8%), and industrials (+0.1%) were symptomatic of a rotational interest as investors sought areas with direct exposure to the economy. Financial stocks additionally benefited from the curve-steepening activity in the Treasury market; energy stocks followed oil prices ($61.31, +1.52, +2.5%) higher.
Lyft (LYFT 61.76, +4.70, +8.2%) contributed to the so-called reopening thesis after raising its Q1 adjusted EBITDA loss expectation to $135 million from $145-150 million and observing that average daily ride-shares were up 4% m/m in February despite severe weather. LYFT shares rose 8%.
A separate note on inflation, the Fed's Beige Book for February economic activity highlighted that "several districts reported anticipating modest price increases over the next several months." Chicago Fed President Evans (FOMC voter) said he doesn't see inflation as a risk at this point. These observations might have tempered any inflation angst.
For what it's worth, the S&P 500 closed just above its 50-day moving average (3818) despite a weak finish.
Reviewing Wednesday's economic data:
- The ISM Non-Manufacturing Index fell to 55.3% in February (Briefing.com consensus 58.6%) from 58.7% in January. The dividing line between expansion and contraction is 50.0%. The February reading marks the ninth straight month of growth for the services sector, but it is the slowest pace since May 2020.
- The key takeaway from the report for a market focusing increased attention on inflation trends, as economic activity picks up, is the upward move in the Prices Index to 71.8% from 64.2% in January. This elevated reading follows on the heels of Monday's ISM Manufacturing Index, which showed the Prices Index at its highest level (86.0%) since May 2008.
- The ADP Employment Change report estimated 117,000 jobs were added to private-sector payrolls in February (Briefing.com consensus +180,000) following an upwardly revised 195,000 increase (from 174,000) in January.
- The IHS Markit Services PMI for February was revised higher to 59.8 from 58.3 in the preliminary reading.
- The weekly MBA Mortgage Applications Index increased 0.5% following a 11.4% drop in the prior week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report, the revised Q4 readings for Productivity and Unit Labor Costs, and Factory Orders for January on Thursday.
- Russell 2000 +12.2% YTD
- Dow Jones Industrial Average +2.2% YTD
- S&P 500 +1.7% YTD
- Nasdaq Composite +0.9% YTD
Market Snapshot
| Dow | 31270.09 | -121.43 | (-0.39%) | | Nasdaq | 12997.77 | -361.04 | (-2.70%) | | SP 500 | 3819.72 | -50.57 | (-1.31%) | | 10-yr Note | -29/32 | 1.477 |
|
| | NYSE | Adv 1524 | Dec 1683 | Vol 1.2 bln | | Nasdaq | Adv 1339 | Dec 2598 | Vol 5.4 bln |
Industry Watch
| Strong: Energy, Financials, Industrials |
| | Weak: Information Technology, Health Care, Materials, Utilities |
Moving the Market
-- Technology sector continues to weigh, while energy and financial sectors rise
-- Treasury yields moving higher amid lingering growth expectations and inflation angst
-- White House speeds up vaccine timeline by two months
|
WTI crude futures settle sharply higher
03-Mar-21 15:30 ET
Dow +4.92 at 31396.44, Nasdaq -342.10 at 13016.71, S&P -36.53 at 3833.76
[BRIEFING.COM] The S&P 500 is trading at session lows with a 1.0% decline, while the Russell 2000 clings onto a 0.1% gain.
One last look at the S&P 500 sectors shows information technology (-2.4%), consumer discretionary (-2.0%), and communication services (-1.4%) leading the benchmark index lower amid pronounced weakness in their mega-cap/growth stocks. The energy (+2.3%), financials (+2.4%), and industrials (+0.6%) sectors remain in the green.
WTI crude futures rose 2.5%, or $1.52, to $61.31/bbl. |
