The tech-heavy Nasdaq Composite declined on Tuesday as a rise in rates placed pressure on the market.
As the S&P 500 fell 0.2%, the tech-heavy Nasdaq lost around 0.7%. The Dow Jones Industrial Average increased 0.2% in the meanwhile.
Bond yields increased, pushing the rate on the 2-year U.S. Treasury note back above 4%, which put pressure on stocks, particularly tech firms. Future earnings, like those promised by growth businesses, become less alluring as rates rise.
Policymakers’ efforts to address the issues have helped to ease concerns about the problem involving regional banks in the United States, but investors’ concern that higher rates could cause the economy to enter a recession has returned.
Interest rates are rising for the second day in a row, and the more economically vulnerable industries, including energy and industrials, are driving the markets, according to Brian Levitt, global market strategist for Invesco. “This is frequently the case as interest rates rise, technology equities are among the underperformers. Investors currently appear to be ignoring the difficulties facing the financial industry and acknowledging that the U.S. economy is still growing steadily.
Tuesday saw a rise in regional banks, with the SPDR S&P Regional Banking ETF (KRE) increasing by roughly 0.5%. First Republic increased by 1%. Shares of New York Community Bancorp grew by 0.8%.
The actions come after a divided session on Monday. Investors struggled to maintain last week’s gains, but pressure mounted on tech stocks. As the S&P 500 increased by 0.16%, the Dow Jones Industrial Average gained 194.55 points, or 0.6%. the Nasdaq Composite index
decreased by 0.47% as tech stocks declined.
Monday’s upbeat news coverage on Wall Street included First Citizens BancShares’ deal to acquire significant portions of Silicon Valley Bank. Additionally, CNBC reported that deposit flows into banking behemoths from tiny institutions had halted.
According to Keith Lerner, co-chief investment officer at Truist, “basically, you have an oversold bounce in these areas that have been beaten up and you’re getting a pause from some of these areas that are leadership.”
It’s not a trend reversal, and there isn’t new leadership, in my opinion.
He added that the markets might be seeing the news of First Citizens’ intention to purchase a sizable portion of SVB favorably.