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Technology stocks fell as bond yields took off on Friday, and the rest of the stock market breathed a sigh of relief as the price of oil held below its high for the week.
The 10-year Treasury yield rose to 2.48% on Friday afternoon, after standing at 2.37% in the morning. Higher yields in long-term bond yields hurt tech stocks more, because they reduce the present discounted value of future earnings. Many technology companies are valued on the basis that they will generate much of their profits for many years.
the Dow Jones Industrial Average gained 153 points, or 0.4%, while the S&P 500 rose 0.5%. But Nasdaq Composite, known for its tech exposure, fell 0.2% after being in the green earlier in the day. About two-thirds of S&P 500 stocks ended up in the green, according to FactSet.
For the week, the S&P 500 gained 1.8%, the Dow rose 0.3% and the Nasdaq rose 2%.
Most stocks received a boost on Friday, while oil continued to weaken, due to reports that Europe would not ban Russian crude immediately—and that the US agreed to increase natural energy—gas shipments to the European Union. West Texas Intermediate crude traded around $113 a barrel on Friday, above its low for the day but still nearly 3% below its high for the week.
Now that the S&P 500 is up almost 9% from its lowest point this year, investors appear to have grown comfortable that the conflict between Russia and Ukraine is far from resolved. The market has also been able to digest the Fed’s plans to raise rates multiple times this year and next as it tries to rein in inflation, even if means putting pressure on the economy.
Citi Group Economists now forecast that the Fed will raise the benchmark interest rate to at least 3.5% sometime in 2023. Latest Fed Forecast it is for a rate of 2.75% after all its increases.
The bond market, for example, seems to believe that the Fed will act aggressively. The 2-year Treasury yield, which reflects expectations about the level of short-term rates over the next two years, rose to 2.3% from 1.94% at the close of trading last Friday. . That’s the largest one-week increase since the week ending June 5, 2009.
Meanwhile, the rise in 10-year bond yields comes as no surprise, as markets indicate investors expect an annual inflation rate of 2.9% over the next 10 years, according to data from the St. Louis. Bond investors typically demand a return above the rate of inflation.
Overall, investors are still expecting a bumpy ride for the stock market. “I’m not particularly optimistic that we’re going to see new highs any time soon,” said Mark Lehmann, chief executive of JMP Securities. “It’s not like we’ve checked the box and completed things to worry about.”
Unsurprisingly, one of those problems is the war between Russia and Ukraine. “The point at which the maximum sanctions are reached and oil prices will be a key determinant of market outcomes in the near term,” wrote Mark Haefele, chief investment officer of global wealth management at
UBS.
Abroad, the pan-European
and the one from tokyo
each gained 0.1% on Friday.
Outside of Japan, Asian stocks were generally lower. Hong Kong
fell 2.5% as regulatory concerns over US-listed Chinese stocks, many of which are also listed in Hong Kong and Shanghai, came back to the fore. On Thursday, the Public Company Accounting Oversight Board said ideas that it and Chinese authorities could soon reach a deal that would prevent the exclusion of Chinese companies from US companies were premature.
Bitcoin and others cryptocurrencies moved higherbuoyed after a week of accelerated institutional adoption and a return of risk appetite among investors in broader markets.
Here are five stocks in motion on Friday:
Bed bath and beyond (BBBY) rose 2.2% after the company agreed with activist investor Ryan Cohen to add three new directors to the retailer’s board.
American Depository Receipts
Rio Tinto (RIO) shares rose 1.6%. UBS upgraded the mining company to Neutral from Sell.
luxury e-retailer
farfetch (FTCH) saw its shares fall 3% even after Société Générale upgraded the shares to Buy from Hold.
carnival body (CCL) shares fell 0.5% even after an upgrade to Hold from Buy on Argus.
Cybersecurity solution provider
fortnite (FTNT) saw its shares fall 0.9%. Bank of America downgraded the stock to Neutral from Buy.
Email Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
