Technology stocks came under renewed pressure on Wednesday while the Dow Jones Industrial Average pulled back from a fresh record high, with investors turning away from tech and growth stocks in anticipation of higher rates.
The S&P 500 declined to pull back further from Tuesday’s record intraday high. The Nasdaq underperformed against the other two major equity indexes. Apple (AAPL) shares built on losses from a day earlier, bringing the stock back down further. after reaching a $3 trillion market capitalization for the first time ever at the start of the week.
Investors eyed the meeting minutes from the Federal Open Market Committee’s (FOMC) December meeting, which suggested the central bank was considering a faster removal of its monetary policy accommodation than previously anticipated. Policymakers suggested that against the backdrop of a firming economic recovery and elevated inflation, interest rates could rise sooner than anticipated. And some policymakers also telegraphed they would opt for shrinking the Fed’s balance sheet soon thereafter.
“Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes said. “Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate.”
Investors Wednesday morning also digested fresh upbeat economic data, as private payroll gains handily exceeded estimates for December. ADP said Wednesday that private sector employers added back 807,000 jobs during the final month of November, nearly doubling expectations as job growth picked up to help alleviate some labor shortages.
In the first few trading days of the new year, investors have piled into cyclical areas of the market, with shares of companies seen as the biggest beneficiaries of a firming economic recovery and rising interest rates outperforming. The energy, financials and industrials sectors outperformed in the S&P 500 on Tuesday, and the Dow Jones Industrial Average composed heavily of cyclical stocks rose by more than 200 points to set an all-time closing high.
Treasury yields jumped to build on gains after moving sharply higher on Monday and Tuesday, which had added pressure to technology and growth stocks valued heavily on future earnings potential. The benchmark 10-year jumped to a 9-month high following the release of the Fed’s meeting minutes Wednesday afternoon.
“[Yields are] moving sharply higher … or in the very recent past, but they’ve been stubbornly lower when you compare them to what the inflationary talk has been,” Scott Kimball, Co-Head of U.S. Fixed Income for BMO Global Asset Management, told Yahoo Finance Live on Tuesday. “There’s been lots of discussion about runaway inflation, the Fed being behind the curve. All of that would translate into a long-end — the 10, 20, 30-year portion of the yield curve — that’s a lot steeper, or materially higher even in absolute terms than it is right now.”
Meanwhile Eddie Ghabour, Eddie Ghabour, founder of KeyAdvisors Group and author of “Common Sense Bull,” told Yahoo Finance he expected the move higher in rates so far this week would ultimately prove to be a “head fake.”
“This increase in rates doesn’t concern me at all. I think it’s going to be short-lived,” he said. “The bigger concern I have right now is the fact that a lot of investors are still carrying a tremendous amount of risk heading into a year that’s going to be unprecedented when the Fed is tightening during a slowdown. It usually is not a good recipe for high-risk assets.
—
—
12:54 p.m. ET: Bitcoin falls, cryptocurrency-related stock slide amid tech rout
Bitcoin prices fell more than 1% Wednesday afternoon to trade just above $46,000, with digital currencies coming under pressure alongside the drop in large-cap tech stocks.
Publicly traded companies with exposure to bitcoin also dropped. Bakkt (BKKT) shares fell more than 7%, while Marathon Digital (MARA) and Riot Blockchain (RIOT) were also each lower by more than 9% and 7%, respectively, during intraday trading.
—
11:27 a.m. ET: Microsoft shares drop 2.5%, pacing toward fifth straight day of losses
Shares of software behemoth Microsoft (MSFT) were on track to fall for a fifth straight day on Wednesday, falling by as much as 2.5% at session lows.
If Microsoft shares end the session lower, it would mark the stock’s longest losing streak since September. The drop came amid a broader drawdown in highly valued technology and growth stocks, in part coming as Treasury yields rose and pressured lofty tech valuations.
—
10:33 a.m. ET: Nasdaq-listed blockchain company announces plans to offer first-ever bitcoin dividend
The Nasdaq-listed company BTCS Inc. announced Wednesday that it will be the first publicly traded U.S. firm to offer investors the ability to receive a dividend issued in Bitcoin.
The data analytics and blockchain company said shareholders can receive a cash dividend worth 5 cents per share or the equivalent in Bitcoin, which the firm is calling a “Bividend.” Investors will need to opt-in with their choice by March 16, ahead of a record date of March 17.
“This is a moment we have long anticipated since the Company purchased the domain, bividend.com, in February 2015,” BTCS CEO Charles Allen said in a press statement. “BTCS is now in the financial position required to execute on the Company’s vision.”
The company, based in Silver Spring, Maryland, said it is “evaluating the appropriateness of future Bividends.”
—
9:30 a.m. ET: Stocks open lower
Here’s where markets were trading just after the opening bell:
-
S&P 500 (^GSPC): -6.35 (-0.13%) to 4,787.19
-
Dow (^DJI): -10.76 (-0.03%) to 36,788.89
-
Nasdaq (^IXIC): -69.27 (-0.47%) to 15,548.99
-
Crude (CL=F): +$0.95 (+1.23%) to $77.94 a barrel
-
Gold (GC=F): +$13.30 (+0.73%) to $1,827.90 per ounce
-
10-year Treasury (^TNX): -1.7 bps to yield 1.649%
—
8:22 a.m. ET: Private payrolls grew much more than expected in December: ADP
Private sector employers added back far more jobs than anticipated in the final month of 2021, suggesting at least some widespread job vacancies were getting filled across the economy.
ADP said Wednesday that private payrolls grew by 807,000 in December. This was nearly double the 410,000 consensus economists expected, according to Bloomberg data. Employers had brought back 505,000 jobs in November, according to ADP’s revised estimate for that month.
The ADP report serves as one measure setting expectations for the “official” government jobs report due out on Friday from the Labor Department. However, ADP’s print during the pandemic especially has served as an imperfect indicator of what to expect from the Labor Department’s reports. In three of the past four months, ADP’s print overshot the Labor Department’s payrolls figure, which last came in at a disappointing 210,000 for November.
—
7:08 a.m. ET Wednesday: Stock futures point to a lower open
Here’s where markets were trading ahead of the opening bell:
-
S&P 500 futures (ES=F): -3.25 points (-0.07%), to 4,781.00
-
Dow futures (YM=F): -1 point (-0.00%), to 36,674.00
-
Nasdaq futures (NQ=F): -56.5 points (-0.35%) to 16,219.25
-
Crude (CL=F): -$0.04 (-0.05%) to $76.95 a barrel
-
Gold (GC=F): +$4.70 (+0.26%) to $1,819.30 per ounce
-
10-year Treasury (^TNX): -1.5 bps to yield 1.651%
—
6:15 p.m. ET Tuesday: Stock futures little changed
Here’s where markets were trading Tuesday evening:
-
S&P 500 futures (ES=F): -0.75 points (-0.02%), to 4,783.50
-
Dow futures (YM=F): -12 points (-0.03%), to 36,663.00
-
Nasdaq futures (NQ=F): -9.5 points (-0.06%) to 16,266.25
—
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter