Treasury Yields Jump, While Mem Stocks Gamestop and AMC Rally
The week has been marked by major volatility in the stock and bond markets as investors flee some of the most popular trades of the past year and parse signals from the Federal Reserve to hike rates. As bond prices have fallen and Treasury yields have soared, investors have shunned stocks of technology and growth companies, particularly those with some of the most speculative bets in the sector.
The S&P 500 started the new year with a new record on Monday, but minutes from the Federal Reserve reaffirmed its intention to roll back the stimulus and suggested it was earlier due to higher inflation. May do so sooner and faster than planned. Broad stock-market gauges and other major indexes ended the week with their worst performance in the first five trading days of a year since 2016.
On Friday, the December jobs report was the latest of many confusing signs about the economic recovery that investors are evaluating.
“The market is a little scared here by the minutes and maybe a little bit of what they’re seeing in the labor market,” said Mona Mahajan, senior investment strategist at Edward Jones.
The jobs report showed that the US added 199,000 jobs in December, down from the 422,000 expected by economists surveyed by Businesshala. Nevertheless, 2021 ended with the addition of a record number of jobs in the US. The unemployment rate fell to 3.9%.
Analysts have struggled to estimate job gains during the pandemic and the government is getting less data from employers. Investors are also grappling with a factor they have mostly ignored for the past decade: inflation. The latest jobs report showed that the average hourly wage rose 4.7% in December from a year ago, up from a wage increase of nearly 3% before the pandemic and adding to historically high inflation figures upset investors. Did.
Adding to the uncertainty, some investors said they were expecting the Omicron version to potentially hamper job gains in the coming months.
The S&P 500 slipped 19.02 points, or 0.4%, to 4677.03 for the fourth consecutive session on Friday. The Nasdaq Composite Index was down 144.96 points, or nearly 1%, at 14935.90. The Dow Jones Industrial Average fell 4.81 points, or less than 0.1%, to 36231.66.
Federal Reserve minutes released Wednesday helped sell stocks in government bonds that continued following monthly jobs reports. Investors have already priced in interest rate hikes and the prospect of the Fed shrinking its bond portfolios in the near future. The yield on the benchmark 10-year Treasury note fell to 1.769%, its biggest three-week yield gain since 2019.
“What was happening in the markets this week was expectations about how fast the Fed is going to tighten policy,” said Fahd Kamal, chief investment officer at Kleinwort Hambros. “This is a transition year where we move from record policy support to actual tightening. There will be enormous volatility as we figure out how to operate in this paradigm.”
As investors fled tech stocks, many have piled up in cyclical corners of the market, such as energy and financial companies. Those groups have outperformed this week due to a decline in the broader market. The S&P 500’s energy group gained nearly 11% this week, while the financial sector gained 5.4%.
Shares of the tech giant, which have been sensitive to interest rate expectations, tumbled this week. Shares of Alphabet were down about 5.4%, while Netflix dropped about 10%. Shares of Cathy Wood’s flagship ARK Innovation exchange-traded fund were down nearly 11%.
Beneath the surface, sales have been even more extreme. According to Sundial Capital Research, nearly 40% of Nasdaq Composite shares are down 50% from their 52-week highs, while nearly two-thirds are in bear markets or down 20%. It highlights how volatile individual stocks are by investors for the next phase of economic recovery.
In corporate news, meme stock GameStop stock rose 7.3% — an even bigger gain earlier in the session — after the Wall Street Journal reported that the company was planning to foray into the cryptocurrency and non-fungible token markets.
Oil prices have risen this week. Global benchmark Brent crude rose 5.1% to $81.75, ending the third straight week higher. According to analysts at ING, cold weather in North Dakota and Alberta, Canada could potentially reduce oil supplies, and if production is affected by protests in crude producer Kazakhstan.
Overseas, the pan-continental stokes Europe 600 was down 0.4%.
Major stock benchmarks in Asia were mixed. The Shanghai Composite Index fell 0.2% on gains in technology stocks, while Hong Kong’s Hang Seng Index gained 1.8%. South Korea’s Kospi index rose 1.2%.
—Sam Goldfarb contributed to this article.
improvement and amplification
Gamestop rally premarket. An earlier version of this article incorrectly referred to GameStop as GameStock. (corrected January 7th)