US Stocks Drift Lower Tuesday 03/02 16:04
Stocks closed broadly lower on Wall Street Tuesday, giving back some of
their big gains from a day earlier.
(AP) -- Stocks closed broadly lower on Wall Street Tuesday, giving back some
of their big gains from a day earlier.
The S&P 500 fell 0.8% after earlier flipping between small gains and losses.
A day before, the benchmark index had leaped 2.4% for its best performance
since June. Technology and internet stocks accounted for much of the selling, a
reversal from a day earlier.
For weeks, investors have been focused on the bond market, where a swift
recent rise in interest rates is threatening one of the main reasons for the
stock market's run to records through the pandemic. Bond yields eased across
the board Tuesday, but expectations for stronger economic growth in coming
months continue to fuel worries that interest rates will head higher.
Higher rates force investors to rethink how much they're willing to pay for
stocks, making each $1 of profit that companies earn a little less valuable.
That's making Wall Street reconsider the value of technology stocks, in large
part because their recent dominance left them looking even pricier than the
rest of the market.
"Valuations have just become problematic across certain pockets of the U.S.
(stock) market and investors are starting to realize that," said Megan
Horneman, director of portfolio strategy at Verdence Capital Advisors.
The S&P 500 fell 31.53 points to 3,870.29. The Dow Jones Industrial Average
lost 143.99 points, or 0.5%, to 31,391.52. The tech-heavy Nasdaq composite
dropped 230.04 points, or 1.7%, to 13,358.79.
Smaller companies fared worse than the rest of the market. The Russell 2000
small-cap index gave up 43.81 points, or 1.9%, to 2,231.51.
Treasury yields have been climbing with expectations for economic growth and
inflation, and such a rise makes borrowing more expensive for homebuyers,
companies taking out loans and virtually everyone else. That can slow economic
The yield on the 10-year Treasury eased a bit Tuesday, falling to 1.41% from
1.44% late Monday. It's a reprieve following weeks of relentless rising. The
10-year yield had crossed above 1.50% last week, up from roughly 0.90% at the
start of the year, and the zoom higher raised worries that more increases would
destabilize the market.
Investors should be prepared for more risks in sectors that have driven the
market's growth through the pandemic because of more inflation, according to
Cliff Hodge, chief investment officer of Cornerstone Wealth.
"What's gotten us here is not likely to get us where we want to be going
forward," he said.
Tech stocks were weak again on Tuesday, with those in the S&P 500 falling
1.6%. But strategists along Wall Street remain fairly optimistic, saying stocks
in other areas of the market are likely to rise with expectations for the
economy's improvement later this year. Gains for banks, energy producers and
other companies whose profits are closely tied to the economy's strength can
help offset a pullback for tech stocks, which had been driving the market for
years, the thinking goes.
Zoom Video Communications, the company whose software helps students and
workers around the world talk with each other from a distance, fell 9% as
concerns over slower subscriber growth offset its otherwise solid quarterly
financial report and forecast.
Rocket Cos. soared 71.2%, the latest stock to be hyped in the same online
forum that fueled the sharp rise in GameStop and other stocks in January.
Shares in Rocket were among the most being "shorted" by hedge funds, according
to FactSet. When an investor shorts a stock, they're betting that its price
will go lower.
The company, which operates several personal finance brands, including
Rocket Mortgage, said last week that its revenue more than doubled in the
fourth-quarter, reflecting strong growth across all its businesses.
Tuesday's modest moves may prove short-lived. Several speeches and data
reports this week could offer more light on the direction of interest rates.
On Tuesday, Federal Reserve Governor Lael Brainard sought to calm financial
markets by emphasizing that the Fed, while generally optimistic about the
economy, is still far from raising interest rates or reducing its $120 billion
a month in asset purchases.
She also said that the Fed is closely monitoring the recent rise in the
10-year Treasury yield and an increase in investors' inflation expectations.
But she repeatedly said the economy is 10 million jobs short of its
pre-pandemic level and the Fed would keep rates at nearly zero until the job
market has fully recovered.
"We've got some distance to go to meet our goals," of higher inflation and
lower unemployment, Brainard said.
Federal Reserve Chair Jerome Powell is scheduled to speak on Thursday, and
at the end of the week will be the government's jobs report, which is typically
the highlight economic report of every month. It also includes numbers for how
much wages are rising across the economy, a key component of inflation.
Worries have been rising in recent months that inflation could be headed
higher as COVID-19 vaccines get the economy back to strong growth and
Washington gets close to delivering another $1.9 trillion in aid for the