NEW YORK – Wall Street largely retreated yesterday, with tech stocks taking the biggest hit amid growing concerns that borrowing rates will creep higher as the US economy – and prices – recover.
The benchmark Dow Jones Industrial Average reversed early losses to close with a gain of less than 0.1% at 31,521.69.
But the broad-based S&P 500 fell about 0.8% to finish at 3,876.5, while the tech-rich Nasdaq Composite Index was the big loser, dropping 2.5% to 13,533.05.
As Congress moves towards approving a huge US$1.9 trillion (RM7.69 trillion) economic stimulus package, which will provide a jolt to growth and job creation, investors have pushed yields on 10-year Treasury notes higher – typically a sign inflation and interest rates will rise as well.
Peter Cardillo of Spartan Capital noted that rising lending rates hit tech companies more since they rely more heavily on financing.
“Generally, when yields go up, interest rates go up,” Cardillo told AFP.
“But this time around, it may not be the case because the Fed keeps saying they’re not going to change their rate policy for some time to come.”
In fact, Federal Reserve Chair Jerome Powell has repeated assurances that the US central bank has no plans to raise the benchmark interest rate until employment has recovered and inflation begins to rise.
He will have another opportunity to address the issues during two days of testimony in Congress today and tomorrow.
Among individual stocks, Boeing had a volatile day, eventually closing more than 2.0% lower after an engine in one of its 777 aircraft failed and broke up over the weekend, forcing the emergency landing of a flight out of Denver, and prompting grounding of 128 planes with the same Pratt & Whitney engine.
The engine maker’s parent company Raytheon Technology lost 1.7%. – AFP, February 23, 2021
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