U.S. stocks traded lower for a third straight day on Thursday as rising bond yields spurred weakness in some of the so-called Magnificent Seven megacap stocks, helping to drive the Nasdaq to a six-week low.
How are stocks trading
-
The S&P 500
SPX
was down 2 points, or 0.1%, to 4,401. -
The Dow Jones Industrial Average
DJIA
shed 42 points, or 0.1%, to 34,725. -
The Nasdaq Composite
COMP
fell by 46 points, or 0.3%, to 13,428.
The Dow and S&P 500 were on track to extend a losing streak to a third straight session as major indexes headed for another week in the red. The S&P 500 hasn’t fallen for three weeks in a row since February, FactSet data show.
What’s driving markets
Bonds have resumed command of the stock market of late as higher yields lash shares of megacap technology stocks, undermining their status as the undisputed market leaders.
Long-dated Treasury yields continued to rise Thursday, with the 10-year yield
BX:TMUBMUSD10Y
touching its highest level since the 2008 financial crisis, rising north of 4.31%. Bond yields move inversely to prices.
Rising yields helped heap more pressure on shares of some of this year’s highflying tech stocks, including Tesla Inc.
TSLA,
Apple Inc.
AAPL,
and Microsoft Corp.
MSFT,
The elite group of megacap tech stocks which also includes Amazon.com Inc., Meta Platforms Corp.
META,
and Alphabet Inc.’s Class A
GOOGL,
and Class C
GOOG,
shares has been credited with driving much of the Nasdaq Composite’s nearly 30% run-up year-to-date. But their market dominance has faded in recent weeks as investors have favored other cyclical sectors like energy and materials stocks. Those two sectors were the best performers on the S&P 500 on Thursday.
“That’s a theme that’s been bubbling up here over the last three to four weeks, but there’s more of an exclamation point on it now,” said David Keller, chief market strategist at Stockcharts.com, during a phone interview with MarketWatch.
“First you had Microsoft and Apple breaking down a few weeks ago, now you’re getting Meta breaking below its 50-day moving average.”
Keller added that rising bond yields tend to have a bigger impact on growth stocks like technology names, while sectors like energy are more resilient.
“Energy can do just fine in a rising rate environment. energy and materials should probably do better in a relative basis,” he said.
Minutes from the Federal Reserve’s July meeting released Wednesday afternoon were being blamed for the latest leg higher in global bond yields. They showed that Fed policy makers could continue raising interest rates amid concerns that inflation could reaccelerate, potentially pushing bond yields even higher.
“It’s really uncertain where terminal interest rates will land given the economy isn’t giving us a decisive picture of being too strong or too weak. It’s keeping the window open for more rate hikes potentially,” said Mohannad Aama, a portfolio manager at Beam Capital Management, during a phone interview with MarketWatch.
Corporate earnings were also in focus as investors received results from Cisco Systems
CSCO,
and retail giant Walmart Inc.
WMT,
Cisco reported strong quarterly results after Wednesday’s close. Walmart also reported stronger than expected earnings, helping to offset some concerns about the strength of the consumer spurred by Target Corp.’s
TGT,
lackluster earnings and guidance from Wednesday.
Shares of Cisco rose 2.6%, while Walmart shares turned lower, down 1.2%.
Economic updates released Thursday helped support the notion that the U.S. economy is growing at a faster pace than economists had expected, potentially complicating the Fed’s efforts to tamp down inflation.
First-time jobless-benefit claims fell by 11,000 to 239,000 last week, a sign that layoffs in the U.S. labor market remain low. The Philadelphia Fed factory index also shot higher to 12 in August, up from negative 13.5 during the prior month, a sign that manufacturers in the U.S. could be exiting a slump.
Companies in focus
-
Hawaiian Electric Industries Inc.
HE,
-15.24%
shares fell after The Wall Street Journal reported that the utility has engaged in talks with restructuring advisers to consider its next steps after the deadly Maui wildfires. -
Shares of Ball Corp.
BALL,
+3.41%
rose 3% after agreeing to sell its aerospace unit to BAE Systems for $5.5 billion. -
Chesapeake Energy Corp.
CHK,
+6.03%
will replace Mercury Systems Inc.
MRCY,
+2.99%
on the S&P MidCap 400, S&P Dow Jones Indices said on Wednesday. Shares of Chesapeake were up 6%. -
Shares of Cigna Group
CI,
-7.10%
and CVS Health
CVS,
-8.89%
dropped following a report that a major nonprofit health insurer was preparing to shun the pharmacy-benefit industry.