A fresh bout of bond volatility hit markets on Friday, sparking a risk-off mood that sent technology stocks sharply lower. The dollar jumped.
The Nasdaq 100 gauge slumped after accelerating vaccinations in the U.S. and the passage of the US$1.9 trillion pandemic-relief bill sent Treasury yields surging. The tech-heavy index dropped as much as 2.1 per cent as the Treasury 10-year yield hit 1.64 per cent. A Bloomberg report that Beijing is expanding a crackdown on Tencent Holdings Ltd. also weighed on the technology sector. The Dow Jones Industrial Average set a record high.
“There’s been a little more volatility than usual, particularly because there’s a number of crosscurrents both tailwinds and headwinds,” said Michael Reynolds, chief investment officer at Glenmede Trust Co.
European shares ended lower, with tech the biggest decliner following the Tencent news. A resurgence of the virus in Italy coupled with division over AstraZeneca Plc’s COVID-19 vaccine also hit sentiment. Burberry Group Plc rose following an announcement that the rebound in its fourth quarter has been stronger than analysts expected.
Markets were jolted on Friday by the surge in yields, after relatively smooth bond sales this week had eased concerns on the fixed-income outlook. The wave of stimulus and vaccine rollout in the U.S. is once more forcing investors to confront the prospect of excessive inflation. The focus now turns to the Federal Reserve decision next week.
“We think the U.S. 10-year yield has further room to go and could reach 1.80 per cent,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”
Elsewhere, European debt dropped after authorities were said to have no intention of expanding stimulus despite their pledge to keep yields in check. Oil fell below US$66 a barrel.
These are the main moves in markets:
The S&P 500 Index fell 0.4 per cent to 3,930 as of 1:16 p.m. New York time.
The Dow Jones Industrial Average climbed 0.5 per cent to 32,641.17, reaching the highest on record with its sixth consecutive advance.
The Nasdaq 100 Index dipped 1.6 per cent to 12,838.67.
The Stoxx Europe 600 Index declined 0.3 per cent to 423, the first retreat in a week.
The Bloomberg Dollar Spot Index rose 0.4 per cent to 1,140.22.
The euro declined 0.4 per cent to US$1.1942.
The British pound declined 0.6 per cent to US$1.3907, the largest decrease in more than two weeks.
The Japanese yen depreciated 0.4 per cent to 109 per dollar, the weakest in about nine months.
The yield on two-year Treasuries gained one basis point to 0.15 per cent.
The yield on 10-year Treasuries increased nine basis points to 1.63 per cent, the highest in 13 months on the biggest climb in more than two weeks.
The yield on 30-year Treasuries jumped nine basis points to 2.38 per cent, the highest in more than 14 months on the largest surge in more than two months.
Germany’s 10-year yield rose four basis points to -0.30 per cent, the biggest rise in more than a week.
West Texas Intermediate crude was little changed at US$66.03 a barrel, the highest in a week.
Gold weakened 0.6 per cent to US$1,711.97 an ounce.
Copper fell 0.6 per cent to US$4.11 a pound.
This content was originally published here.