The decline in the US stock market accelerated amid continued growth in Treasury yields
In the first half of the American session on Tuesday, September 28, the US stock market showed a large-scale decline. Tech companies are again under solid pressure as US government bond yields continue to rise, and September is well-positioned to be the worst month for the Nasdaq Composite this year.
S&P 500 – 4,361 p. (-1.81%), from the beginning. + 16.25% Dow – 34,441 p. (-1.23%), from the beginning. year + 12.55% Nasdaq – 14,592 p. (-2.53%), from the beginning. + 13.31%
A week ago, the principle “buy on rumors and sell after the fact” misfired. The results of the Fed meeting on September 22 did not bring any surprises. Still, investors seemed to be waiting for its completion to immediately begin to put into prices what for a long time.
Jerome Powell said that the time to cut the asset purchase program is approaching, and FOMC members predicted at least three rate hikes in 2023. The very next day, the derivatives market (Eurodollar futures) took into account the prices of the federal funds rate increase by a complete 0.25 % by December 2022. Medium-term Treasury yields began to rise immediately after the announcement of the results of the FOMC meeting and long-term ones – the next day.
Today, the yield on ten-year plans has reached 1.5652% (a record value since mid-June), and the work on five-year plans for the first time since March 2020 exceeded 1% and reached 1.0406% (a record value over the past year and a half). The rise in Treasury yields, like yesterday, put intense pressure on technology stocks, which are very sensitive to the dynamics of market rates.
That is why today, the Nasdaq Composite is again looking noticeably worse than the Dow Jones Industrial or the S&P 500. On the other hand, technology stocks have been outperforming in recent months, and now the gap with other sectors is narrowing. Moreover, cyclical companies have been among the most resilient recently, suggesting that investors consider the outlook for further economic recovery more significant than pandemic fears.
Fed Chairman Jerome Powell said today in his Senate speech that inflation is likely to remain high in the coming months, and only then will it begin to decline. And Finance Minister Janet Yellen noted that if the national debt limit is not frozen or raised, the US federal government runs the risk of running out of money around October 18. However, the dynamics of 1-3 monthly Treasuries suggest that the market does not believe in the US default.
The Conference Board’s Consumer Confidence Index was published today in the United States, which unexpectedly dropped in September for the third time in a row (to 109.3 points versus the consensus forecast of 115.0 points and 115.2 points (revised from 113, 8 p.) In August).
It probably suggests that the problematic epidemiological situation and high inflation continue to darken the mood of Americans.
S&P 500 components showed fragile dynamics: all 11 major sectors of the index were declining. The worst performers were telecoms (-2.66%), IT companies (-2.54%), and manufacturers of second-hand goods (-1.90%). Conversely, 17% of S&P 500 components rose in price, and 83% fell in price. Altimmune (ALT) shares lost 21.6% after the publication of the first phase of research on a drug for weight loss Coinbase (COIN) shares lost 1.6%: JMP Securities began covering the paper with a rating “better than market” and a target of $ 300. Analysts believe Coinbase will remain the industry leader for years to come.
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Wells Fargo Securities lowered its security target to $ 203 from $ 216, citing concerns about weak growth in video streaming subscribers.
