Tech Rally Sputters As Yields Rise Before Powell: Markets Wrap
A rally in big tech fizzled out as bond yields rose, with traders wading through remarks from a slew of Federal Reserve officials and awaiting Jerome Powell’s speech on Friday for clues on the outlook for interest rates.
The S&P 500 erased gains, while the Nasdaq 100 fell more than 1% — after rising about as much earlier in the day. The megacap space came under pressure, with Tesla Inc. and Apple Inc. each dropping at least 1.8%. Nvidia Corp. trimmed most of an advance that sent the chipmaker to an all-time high.
“Nvidia is the stock market’s new Tesla, where the market blindly assigns a ridiculously high and unrealistic valuation,” said David Trainer, chief executive officer of New Constructs, an investment research firm based in Nashville. “We’re not denying that Nvidia is a great company, but we are pointing out that its valuation is beyond lofty and unjustifiable.”
Traders are also bracing for the annual gathering of top central bankers in Jackson Hole, Wyoming, where Powell is scheduled to deliver a speech at 10:05 a.m. Washington time Friday. The Fed chief will likely use his platform to outline how officials will assess whether rates should go higher and determine when it’s time to start cutting them.
Fed Bank of Philadelphia President Patrick Harker sees interest rates on hold for the rest of this year, and thinks policymakers have likely undertaken sufficient tightening, telling CNBC that “we’ve probably done enough.” Meantime, former Fed Bank of St. Louis President James Bullard said a reaccelerating US economy could prompt higher borrowing costs.
Treasury two-year yields, which are more sensitive to imminent policy moves, hovered near 5%. The dollar rose against all of its developed-market peers.
Corporate Highlights
Boeing Co. and its biggest supplier, Spirit AeroSystems Holdings Inc., fell after the planemaker disclosed improperly drilled holes in a component that helps maintain cabin pressure within the 737 Max jet.
Snowflake Inc. sank after giving a sales outlook for the current quarter in line with expectations, suggesting that companies are still cautious about expanding their cloud software budgets.
Dollar Tree Inc. slipped as its earnings forecast fell short of analyst estimates as the company contends with challenges such as higher wages and a less profitable sales mix, one year after introducing a higher price point.
T-Mobile USA Inc. is cutting 7% of its staff, part of an effort to rein in costs as the company spends heavily to attract new subscribers in an increasingly competitive market.
Key events this week:
Japan Tokyo CPI, Friday
US University of Michigan consumer sentiment, Friday
Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.6% as of 11:36 a.m. New York time
The Nasdaq 100 fell 1.3%
The Dow Jones Industrial Average fell 0.4%
The Stoxx Europe 600 fell 0.4%
The MSCI World index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.3% to $1.0832
The British pound fell 0.7% to $1.2636
The Japanese yen fell 0.6% to 145.68 per dollar
Cryptocurrencies
Bitcoin fell 2% to $26,063.83
Ether fell 2.3% to $1,645.56
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.21%
Germany’s 10-year yield was little changed at 2.52%
Britain’s 10-year yield declined four basis points to 4.43%
Commodities
West Texas Intermediate crude fell 0.2% to $78.75 a barrel
Gold futures were little changed