Dow rises 100 points as 10-year yield tops 1.5%, tech shares weigh on broader market

The S&P 500 was under pressure on Monday as traders braced for the final week of a volatile September.

The S&P 500 fell by 0.3% and the Nasdaq Composite shed more than 1% as tech stocks showed weakness in early trading. The Dow Jones Industrial Average rose more than 100 points as energy stocks and bank shares rose.

The divergence for the major averages came as Treasury yields pushed higher. The 10-year Treasury yield increased on economic optimism and inflation fears, briefly topping 1.5% on Monday. That’s the highest since June and up from 1.30% at the end of August.

“We believe that these [bond market] moves have provided the spark for another ‘Value Rip’ across equity markets. In our view, the direction of longer-term interest rates should remain the #1 driver of market returns, sector rotation & thematic performance in the weeks ahead,” Chris Senyek of Wolfe Research said in a note to clients.

Alphabet, Apple and Nvidia were lower in early trading, weighing the S&P 500 and Nasdaq. Tech stocks are seen as sensitive to rising interest rates because higher debt costs can make long-term growth less attractive to investors.

Also weighing on sentiment was a potential government shutdown to end the week.

Stocks linked to the economic comeback led the early gains as U.S. Covid cases continued to roll over. There were 114,000 new cases, on average, the last 7 days through Friday, down from a 7-day average of about 160,000 cases at the peak of this latest wave in early September, according to the CDC.

Pfizer CEO Albert Bourla said on Sunday that he thought the U.S. could return to normal “within a year” though annual vaccinations might be needed.

Additionally, the August reading for durable goods orders came in well above expectations on Monday, powered in large part by a jump for the transport sector.

Carnival Corp rose nearly 3% and United Airlines added 1.7% in early trading. Shares of Goldman Sachs rose 2% as higher rates appeared to boost bank stocks.

Exxon Mobil and Occidental Petroleum led gains in the energy sector as WTI crude continued its September run, topping $74 a barrel.

Government shutdown?

The blue-chip Dow finished the week 0.6% higher, breaking a three-week losing streak. The S&P 500 rose 0.5% on the week, while the tech-heavy Nasdaq Composite edged up 0.02% last week.

“The market recovery indicated that the buy-the-dip mentality remains,” Mark Hackett, chief of investment research at Nationwide, said in a note.

So far, September is living up to its reputation for volatility and weakness as major averages have all registered modest losses. The S&P 500 is off by 1.5%, on track to post its first negative month since January. The broad equity benchmark is about 2% off its record high from Sept. 2. The Dow is down 1.6% for the month, while the Nasdaq is down 1.4%.

But overall, investors continue to buy the dip for stocks. The S&P 500 fell as much as 4% from its record during the month before turning around. Friday was 224 trading days since the last 5% pullback, the 8th longest streak since 1930, according to Goldman Sachs.

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“We continue to exercise caution in the near term, especially as we enter the seasonally weakest part of the year (late September — mid-October),” Larry Adam, CIO at Raymond James, said in a note. “However, given continued robust economic growth, our bias is to hold existing equity exposure or add opportunistically on weakness.”

Elsewhere, bitcoin rebounded about 2% to $43,454 after dropping 5% on Friday. The sell-off came after China’s central bank declared all cryptocurrency-related activities illegal.

https://www.cnbc.com/2021/09/26/stock-market-futures-open-to-close-news.html

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