News: Nasdaq, S&P 500 end lower as U.S. yields rise; Disney lifts Dow.
NEW YORK (Reuters) – The S&P 500 and Nasdaq closed lower Monday as rising government bond yields and the prospect of rising inflation sparked valuation concerns and hit the stocks of soaring growth companies.
Dow industrials ended higher, helped by a surge in Walt Disney Co-shares.
Benchmark ten-year Treasury yields rose 1.37% on Monday. Since the beginning of February, yields have increased 26 basis points for 10 years, on the way to their biggest monthly gain in three years.
However, some analysts noted that the stock pullback was expected after a strong rally this year and 2020.
“This is a bit of a setback, largely because stocks are a bit overheated and there are some concerns that people are making mountains of molehills,” said Brian Reynolds, chief market strategist at Reynolds Strategy.
He cited concerns about the surge in government bond yields, but noted that junk bond yields hit an all-time low over the past week, suggesting that government bond security has shifted to corporate risk among investors .
“That’s bullish for stocks,” he added.
Federal Reserve Chairman Jerome Powell is expected to address the Senate Banking Committee Tuesday, and investors are expected to look for possible changes in the Fed’s cautious outlook.
“Investors are dealing with… what this means (higher government bond yields) from an inflationary perspective. Because of that, there is a certain tantrum in the market right now, ”said Lindsey Bell, chief investment strategist at Ally Invest in Charlotte, North Carolina.
The stocks of Apple Inc, Microsoft Corp, Alphabet Inc, Tesla Inc, and Amazon.com Inc have resumed their slide from the previous week.
The largely positive fourth quarter results had pushed Wall Street major indices to record highs early last week, but the rally slowed, partly due to fears of a possible lag in US vaccination efforts and inflation concerns from stimulus measures.
Unofficially, the Dow Jones Industrial Average rose 29.08 points, or 0.09%, to 31,523.4, the S&P 500 lost 30.2 points, or 0.77%, to 3,876.51, and the Nasdaq Composite fell 341.42 Points or 2.46% to 13,533.05.
The S&P 500 turned down five sessions in a row, the longest such series in a year.
Value stocks outperformed growth stocks in February, with investors betting on a rebound in industrial activity and a pickup in consumer demand as countries introduce vaccines to tame the pandemic.
Both the S&P 500 industrial and financial sectors rose while energy stocks rose on higher oil prices.
Discovery Inc jumped after the media company announced it expected 12 million subscribers to paid streaming globally by the end of February as coronavirus-induced restrictions kept people at home.
Kohl’s Corp won after a group of activist investors named nine directors to the chain’s board of directors.
Principal Financial Group Inc added after a media report that activist investor Elliott Management Corp has acquired a stake in the life insurance company and intends to push for changes.
Reporting by Gertrude Chavez-Dreyfuss in New York; Adaptation by Matthew Lewis and David Gregorio
Original Source © Reuters