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June 17, 2021, 4:30 p.m. EDT

Dow ends down for fourth day, while tech stocks rally, as investors weigh Fed’s new inflation outlook

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By William Watts and Mark DeCambre and Thornton McEnery

U.S. stock benchmarks put in a mixed performance Thursday, with technology and other growth-oriented shares rallying, but the Dow Jones Average fell for a fourth day, after the Federal Reserve rattled the markets Wednesday by raising its forecast for inflation and signaling that it could lift benchmark interest rates sooner than had been expected.

The central bank also discussed the eventual reduction of asset purchases that had been installed to help ease financial market conditions during the pandemic.

How did stock markets trade?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.36% was down 210.22 points, or 0.6%, at 33,823.45, a four-day losing streak which is the longest since January, according to Dow Jones Market Data.

  • The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.02% edged up 1.84 points, or 0.04%, to 4,221.86.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.70% jumped 121.67 points, or 0.87%, to 14,161.35.

On Wednesday , the Dow closed 265.66 points lower to end at 34,033.67, off 0.8%, falling and closing below its 50-day moving average for the first time since early March. The S&P 500 index shed 22.89 points, or 0.5%, closing at 4,223.70, while the Nasdaq Composite Index slipped 33.17 points to finish at 14,039.68.

What’s drove the market?

Big technology stocks made a comeback Thursday, pushing the Nasdaq to near a record close, as longer-term Treasury yields plunged, while commodity prices fell as the U.S. dollar strengthened, dragging down some of the Dow’s key components like Dow /zigman2/quotes/203121064/composite DOW -0.13% , Chevron /zigman2/quotes/205871374/composite CVX +0.57% , and Caterpillar /zigman2/quotes/203434128/composite CAT +0.73% .

On Wednesday the Fed on Wednesday tilted its outlook on inflation and interest rates and now the market needs to process what is being viewed as a slightly less accommodative stance, analysts said.

With gains led by tech and other growth stocks, which are more sensitive to rises in interest rates, it looks like investors “believe that the economy will continue to outperform in the months ahead, even if it eventually means higher interest rates,” said Fawad Razaqzada, analyst at ThinkMarkets, in a note.

“But this argument doesn’t seem right to me,” he cautioned. “I would be wary of an equally sharp drop should bond yields start moving higher again. Given the sharp dollar rally, I wouldn’t bet against rising U.S. yields. So, it is possible today’s tech rally may fade, possibly as early as later in the day. ”

U.S. Treasury yields, particularly in the belly, or middle, of the curve, jumped Wednesday following the Fed announcement. The 10-year benchmark yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.87% dropped 5.6 basis points, after a rise Wednesday, easing fears of an unruly selloff that could send yields sharply higher.

“Just as recent data should enable the Fed to be patient as additional economic developments unfold, we believe that interest rates within the current range, should allow investors to also be patient as they evaluate what’s next for the economy and financial markets,” wrote analysts at Janus Henderson, on Thursday.

The dollar, however, jumped, with the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.12% , a measure of the currency against a basket of six major rivals, closed up almost 0.9%, at a two month high.

“The stage is set for what I feel is a period of somewhat higher volatility as the narrative changes and traders adjust to a future reduction in liquidity conditions,” said Chris Weston, head of research at Pepperstone, in a note. “Powell et al will make it clear that any changes will be glacial and will be communicated well in advance and there is no reason to believe we’ll see a collapse in risk sentiment.”

The Fed’s updated policy outlook signals that 13 of 18 members of the Federal Open Market Committee, or FOMC, are expecting an interest-rate increase by the end of 2023, up from 7 of 18 in March, and 11 see two or more hikes by that date. Seven of the Fed’s rate-setting committee expect to raise rates by the end of 2022, up from four in March.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
34,930.93
-127.59 -0.36%
Volume: 347.17M
July 28, 2021 4:55p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,400.64
-0.82 -0.02%
Volume: 2.09B
July 28, 2021 4:55p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
14,762.58
+102.01 +0.70%
Volume: 3.80M
July 28, 2021 5:16p
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/zigman2/quotes/203121064/composite
US : U.S.: NYSE
$ 61.87
-0.08 -0.13%
Volume: 4.11M
July 28, 2021 4:00p
P/E Ratio
11.36
Dividend Yield
4.53%
Market Cap
$46.20 billion
Rev. per Employee
$1.08M
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/zigman2/quotes/205871374/composite
US : U.S.: NYSE
$ 101.18
+0.57 +0.57%
Volume: 8.55M
July 28, 2021 4:03p
P/E Ratio
N/A
Dividend Yield
5.30%
Market Cap
$194.45 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/203434128/composite
US : U.S.: NYSE
$ 211.44
+1.54 +0.73%
Volume: 3.25M
July 28, 2021 4:00p
P/E Ratio
33.79
Dividend Yield
2.10%
Market Cap
$114.98 billion
Rev. per Employee
$429,044
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
1.24
+0.01 +0.87%
Volume: 0.00
July 28, 2021 10:45p
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/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
92.21
-0.11 -0.12%
Volume: 0.00
July 28, 2021 10:35p
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