U.S. stocks fell Friday as government bond yields ticked higher again, putting major indexes on course for modest weekly declines.
The S&P 500 edged down 0.6%. The Dow Jones Industrial Average ticked down 0.9%, and the Nasdaq Composite dropped 0.5%. All three indexes were on course for weekly losses of about 1%.
In the bond market, the benchmark 10-year Treasury yield edged up to 1.732% after ending Thursday at 1.730%, its highest since January 2020.
Markets have been choppy this week, with investors weighing brightening economic prospects on one hand and worries that interest rates will climb sooner than anticipated on the other. Investors are betting that inflation will rise as growth picks up and remain elevated long enough to force the Federal Reserve to tighten monetary policy. Those concerns have led to a sharp selloff in the government bond market and spurred investors to exit tech and other high-growth stocks.
“After a bit of significant selling, investors tend to lick their wounds and wake up and say: Is this a real selloff or a temporary blip in the road?” said
co-chief investment officer at private bank
Friday’s relatively muted moves are “indicative that investors think it is just a bump in the road.”
Treasury yields have risen for the past three days as investors sold down bonds in anticipation of higher inflation. A jump in the supply of Treasurys as the government funds trillions of dollars in Covid-19 relief spending has also muted appetite for bonds.
“Investors are taking the view that there is going to be some inflation, which tends to be bad for bonds: you tend to lose money if there is an inflationary environment and you own government bonds,” Mr. Perdon said. “So ultimately, investors have been trying to front-run that move.”
The Fed said Friday that it would allow a yearlong reprieve for the way big banks account for ultrasafe assets such as Treasurys to expire at the end of the month, pressuring bank stocks. JPMorgan Chase dropped 3.8%, while Bank of America and Citigroup fell about 2%.
In corporate news,
rose 6.3% after the package giant said its quarterly profit nearly tripled.
fell 2.8% after the sneaker company reported revenue that fell short of analysts’ expectations due to shipping delays caused by container shortages and congestion at ports.
Overseas, the pan-continental Stoxx Europe 600 fell 1.1%. Delays to the vaccine rollout in Europe are weighing on expectations for growth in the region, investors said.
“From a macro sense, it is difficult to see how Europe is going to outperform,” said
chief strategist at Principal Global Investors.
Travel companies in Europe declined after France announced another lockdown for the area around Paris and several other regions.
Aeroports de Paris
fell 2.8% and
dropped about 4%.
In Asia, most major benchmarks fell. The Shanghai Composite Index declined 1.7%, and Hong Kong’s Hang Seng retreated 1.4%.
The first high-level talks between the Biden administration and Chinese officials are ongoing in Alaska, with both sides trading criticism. Investors are nervous about a continuation of tensions between the two major economies.
“The tone suggests that the U.S.-China relationship will be just as tense as with the previous U.S. administration,” Mrs. Shah said. “As we’ve seen in the last number of years, that tense relationship has meant that they will have a few more struggles than otherwise, and it also affects those around them and within their supply chains.”
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