June 28, 2022

Wall Street Slips with Growth Stocks Struggling Amidst Rising Bond Yields

On Thursday, the main indexes on Wall Street declined, as trading remained choppy and growth and technology stocks were struggling due to uncertainty. Meanwhile, a weaker risk appetite and climbing bond yields gave way to concerns about the aggressive hike in interest rates and soaring inflation. Morning trading saw nine out of the eleven major S&P sectors decline, with materials and energy recording the biggest losses. The highest gains were recorded in the consumer staples sector of around 0.5%. There was a 1% fall in Amazon.com and Apple. Inc. stocks, which brought down the Nasdaq and S&P 500 indexes.

There was also a 1.7% decline in Bank of America, while a 1.2% drop was recorded in the broader bank index. The US Treasury yield rose by 3.07% to reach the highest they have been since May 11th, which upped the pressure on growth stocks that are rate-sensitive. Inflation worries also took the lead, with the US CPI (consumer price index) data due for release on Friday. Meanwhile, prices of Brent crude rose to $123 per barrel. Investors are concerned that high numbers of inflation could mean that the US Federal Reserve will not slow down its aggressive tightening of the monetary policy.

It is expected that the central bank will continue hiking up interest rates against the backdrop of a tight labor market, high consumer spending as well as a stock market that is becoming increasingly volatile. Market strategists said that there will not be a robust recovery in the market unless there is an indication that inflation might be going down, which will show that the Fed is right to take such an approach and that the economy has not drastically weakened. The interest rate has already gone up this year by three-quarters of a percentage point and the US Federal Reserve intends to hike it up further by 50 basis points in June as well as July.

There was a 0.18% fall recorded in the Dow Jones Industrial Average, as it dropped by 60.73 points to reach 32,850.17. Meanwhile, there was a 0.22% drop in the S&P 500, as it fell by 9.04 points to reach 4,106.73. There was also a 0.25% decline in the Nasdaq Composite, as it fell by 30.00 points to reach 12,056.27. An increase of 3.9% was recorded in Tesla Inc.’s shares, as the electric automaker disclosed that its sales for the last month had been around 32,165. This was a sharp increase from April’s sales of 1,152.

This saw its brokerages give its stock a ‘buy’ rating and its profit estimates were increased for the next three years. There was also a 1.6% drop in Alibaba Group, after its affiliate Ant Group announced that it does not intend to file for an initial public offering (IPO). It had been reported that the authorities in China had finally given Ant Group the green light to revive its IPO, which had previously been blocked, but the company does not seem to be willing to do so anymore.

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