Dow Falls Over 550 Points as Bond Yields Rise
February 25 2021 - 1:41PM
Dow Jones News
By Anna Hirtenstein and Akane Otani
U.S. stocks tumbled Thursday as a wave of selling spread beyond
the technology sector, taking down swaths of the market.
The Dow Jones Industrial Average dropped 553 points, or 1.7%,
after closing Wednesday at an all-time high. The S&P 500 shed
2.3%, and the Nasdaq Composite lost 3.1%.
Stocks' momentum has faltered the past week as investors have
faced a sharp and swift rise in bond yields. Money managers have
broadly attributed the shift to bets on the economy picking up,
something that should be a boon to corporate profits. But the
swiftness with which yields have moved has also had another effect:
It has tempered enthusiasm for more richly valued, risky parts of
the market.
Investors rushed out of some of the hottest stocks of the year,
sending shares of companies like Apple, Alphabet and Netflix down
more than 2% apiece.
While relatively cheap corners of the market appeared to hold up
well at first, with bank stocks and energy producers initially
higher for the day, those gains dwindled in afternoon trading.
The KBW Nasdaq Bank Index of 24 lenders slipped 1.8%, wiping out
all of its earlier advance.
"The market is jittery. The bond yields' rising is putting
equities, especially growth stocks, under pressure," said Sebastien
Galy, a macro strategist at Nordea Asset Management. "There is a
bit of a risk reduction broadly."
One group of stocks that bucked the trend: "meme stocks" that
have surged in popularity among individual investors this year.
In a wave of volatility reminiscent of last month's rally,
GameStop jumped 68%, while AMC Entertainment climbed 9.8%. The two
stocks had soared in overnight trading as well.
The moves show "there is still liquidity and a lot of access to
speculative bets," said Sophie Chardon, cross asset strategist at
Lombard Odier. "We have to be prepared to live with this kind of
targeted bubble, but I wouldn't see it as a threat to the global
equity market."
Meanwhile, government bond prices fell, with the yield on the
benchmark 10-year Treasury note ticking up to 1.493% from 1.388%
Wednesday.
"The rise in yields is supportive for banks; higher oil prices
are supportive for energy. It is a change of leadership," Ms.
Chardon said.
Overseas, the pan-continental Stoxx Europe 600 edged down
0.4%.
Among individual equities, beer maker Anheuser-Busch InBev fell
almost 6% after its fourth-quarter profit came in below
estimates.
British packaging company DS Smith jumped 5.7% on reports that
rival Mondi is exploring a takeover.
Investors have also been selling European government bonds in
recent weeks as they look for higher returns. The yield on French
10-year bonds, which moves inversely to the price, ticked up above
zero for the first time since June and reached as high as
0.024%.
In Asia, most major benchmarks finished the day up.
The Shanghai Composite Index added 0.6%, snapping a three-day
losing streak, and Hong Kong's Hang Seng Index climbed 1.2%.
South Korea's Kospi Index rallied 3.5% after its central bank
kept interest rates at historic lows, citing a need to continue
supporting the country's economy.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
February 25, 2021 13:26 ET (18:26 GMT)
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