US tech stocks hover as investors rate Fed minutes and mixed data
Tech stocks slipped at the end of a wild trading day on Thursday, in which a set of economic data mixed with a hawkish Federal Reserve tilt clouded investment prospects for US stocks.
Wall Street’s Nasdaq Composite stock index, which fell 3.3% on Wednesday in its worst session since February, slipped 0.1%.
But the slight drop masks what had been a volatile trading session, with the index dropping as low as 1.2% at one point before climbing back up to 0.7%.
The saw moves followed weak services data, which signaled a continued disruption in the supply chain and higher than expected initial jobless claims. The data initially caused a pause in the abandonment of high-valuation tech stocks which are seen as the near-term victim of a resurgent economy and higher Treasury yields.
However, Thursday’s weaker data contrasted with Wednesday’s figures showing an increase in private payrolls and better than expected manufacturing data. Also on Wednesday, the minutes of the last Fed meeting showed it could raise interest rates and tighten financial conditions faster than expected, helping to push stocks away from rate-sensitive tech companies. interest.
The markets have entered an “unstable equilibrium,” according to Alex Veroude, investment director for North America at Insight Investment.
“I think everyone is thinking today about how hawkish the Fed will really be,” he said. “I think it will take a while for people to form their opinions.”
The blue-chip S&P 500 index also rebounded before closing 0.1% lower, with shares of large tech companies dragging both ends of the benchmark’s performance.
Companies like Apple and Tesla pulled the index lower with losses of 1.7% and 2.2%, respectively. Facebook’s parent company Meta Platforms and Nvidia pushed it higher with gains of 2.6% and 2.1%, respectively.
Closely watched exchange-traded fund Ark Innovation also recovered from some of its earlier losses on Thursday, ending the day down 0.5%. The day of the decline brought its losses for the year to over 9%, extending a steep decline into 2021.
Overall, the energy sector was the best performing sector in the S&P 500, with Brent crude oil rising 1.5% to $ 81.99 per barrel.
In Europe, the regional Stoxx 600 stock index closed down 1.3% and in Asia, Japan’s Nikkei 225 closed down around 2.9%. Mainland China’s CSI 300 fell 1%. Hong Kong’s Hang Seng Index rose 0.7%, however, as steep declines in Chinese tech stocks reversed.
“The markets are waking up to the end of the easy money,” said Olivier Marciot, cross-asset investment manager at Unigestion.
“We’ve had a lot of quantitative easing and monetary support, which creates an environment in which all assets tend to thrive, and when you take that out it’s the other way around,” he added.
Government bond yields rose as investors continued to anticipate accelerating central bank policy tightening. The yield on the benchmark 10-year US Treasury index, which rises as the prices of the government debt instrument fall, added about 0.02 percentage point to 1.72%. This marked a slowdown in selling which saw the yield on debt – which affects borrowing costs and asset valuations around the world – soar to about 1.51% at the start of this week.
European government bonds were also carried away by the liquidation minutes after the Fed. The German 10-year bond yield fell to minus 0.07%, its highest level since May 2019.
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