Dow Gains, S&P 500 Closes Lower as Market Assesses Fed Rate Hikes

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 4, 2022. REUTERS/Brendan McDermid

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  • Banks report first-quarter profit starting next week
  • 10-year Treasury yield at three-year highs
  • Indices: Dow ends 0.4%, S&P down 0.27%, Nasdaq down 1.34%

NEW YORK, April 8 (Reuters) – The Dow rose and the S&P 500 closed lower in choppy trading on Friday, as battered bank stocks rose and investors grappled with how best to deal with an economy that could collapse as the Federal Reserve moves. to aggressively tackle inflation.

The benchmark 10-year US Treasury bond yield hit a three-year high of 2.73%, helping to boost the S&P banking index. (.SPXBK), which rose 1.18%, after falling to 13-month lows on Thursday. The index is down 10.8% so far this year.

Large rate-sensitive lenders rose, with JPMorgan Chase & Co. (JPM.N) gaining 1.8%, Bank of America Corp (BAC.N) 0.7%, Citigroup Inc. (CN) 1.7% and Goldman Sachs Group Inc. (SG.N) 23%.

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Since hitting two-month highs in late March, the market has been trending lower as the Federal Reserve signals it will aggressively raise rates, prompting investors to reposition their portfolios. Economically sensitive value stocks this year have outperformed high-tech growth stocks, which often rely on low rates.

“We’re entering a very long-term and significant period where value outpaces growth. It’s not just a cyclical adjustment, it’s a secular story,” said David Bahnsen, chief investment officer at wealth manager Bahnsen Group in Newport Beach. , Calif. .

“The value growth story is a big one and it’s a byproduct of two things, which is what you want. Growth is overhyped and value is underhyped,” he said.

The Russell 1000 Value Index (.RLV) rose 0.51% while the Russell 1000 Growth Index (.RLG) it fell 1.09% on the day.

Value outpaces growth so far this year

Investors are weighing the probability of a recession with two outcomes. On the one hand, the Fed could engineer a “soft landing” with slow but positive growth, leaving banks “woefully oversold,” said Erika Najarian, a banking analyst at UBS.

Or a sharp slowdown is imminent, triggering an automatic sell-off of bank stocks, since “owning banks in a recession is no fun,” he said.

Big US banks, which kick off their first-quarter earnings season next week, are expected to post a big decline in profit from a year earlier, when they benefited from exceptionally strong deals and operations. read more

“There will always be a price at some point where people will jump in and think things are cheap and they could buy,” said Randy Frederick, managing director of trading and derivatives at the Center for Financial Research at Schwab.

“Maybe a 52-week low was enough to get some people into the financial sector,” Frederick said, noting that the 10-year Treasury yield was at its highest level since March 2019.

The Dow Jones Industrial Average (.DJI) rose 137.55 points, or 0.4%, to 34,721.12, the S&P 500 (.SPX) lost 11.93 points, or 0.27%, to 4,488.28 and the Nasdaq Composite (.IXIC) it fell 186.30 points, or 1.34%, to 13,711.00.

Volume on US stocks was 10.37 billion shares.

For the week, the S&P fell 1.16%, the Dow lost 0.28% and the Nasdaq lost 3.86% as the index took a hit after Fed officials raised concerns about rapid rate hikes that would cause a slowdown. read more

Tesla Inc stock (TSLA.O)Nvidia Corp. (NVDA.O) and Alphabet Inc. (GOOGL.O) it fell between 1.9% and 4.5% as mega-cap stocks extended this week’s decline due to rising Treasury yields.

The NYSE FANG+TM Index (.NYFANG)which includes Inc. (AMZN.O) and Apple Inc. (AAPL.O)fell 1.76% and semiconductor stocks (.SOX) fell 2.42%, extending the week’s decline.

Robinhood Markets Inc (HOOD.O) fell 6.88% after a report said Goldman Sachs downgraded the online brokerage, while Kroger Co (KR.N) jumped 2.99% in a ratings upgrade.

Downside issues outnumbered advances on the New York Stock Exchange by a ratio of 1.20 to 1; on Nasdaq, a ratio of 1.66 to 1 favored decliners.

The S&P 500 posted 58 new 52-week highs and two new lows; the Nasdaq Composite recorded 53 new highs and 184 new lows.

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Reporting by Herbert Lash in New York Additional reporting by Bansari Mayur Kamdar and Praveen Paramasivam in Bengaluru Editing by Shounak Dasgupta and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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