By William Watts and Sunny Oh
U.S. stocks ended lower on Tuesday, led by technology stocks, a day after major indexes booked their best daily gains in more than three months and global bond yields halted their unsettling rise.
How are stock benchmarks performing?
The Dow Jones Industrial Average (DOW:DJIA) fell 143.99 points, or 0.5%, to 31,391.52.
The S&P 500 (S&P:SPX) slid 31.53 points, or 0.8%, to 3,870.29.
The Nasdaq Composite (NASDAQ:COMP) dropped 230.04 points, or 1.7%, to 13,358.79.
On Monday , the Dow booked its best daily gain since Nov. 9, the Nasdaq Composite Index registered its best day since Nov. 4, while the S&P 500 finished the session with its best daily gain since June 5.
What’s driving the market?
Equity markets came under pressure a day after upbeat reports on the strength of the economy and a slight pullback in sovereign bond yields provided some support for risky assets as the outlook for the COVID-19 pandemic improves.
But investors remain jittery after a sudden rise in Treasury yields last week threatened to tighten financial conditions for an economy still recovering from the pandemic and called stock market valuations into question.
Analysts said the bond-market selloff last week reflected expectations that the distribution of vaccines from the likes of Johnson & Johnson (NYS:JNJ) and other drugmakers, as well as a likely imminent infusion of fresh government spending, would drive up inflation and bond yields, as well as economic growth, in the second half of 2021.
“Markets are a bit on edge. Last week’s interest rates moved too fast for comfort. But it’s confirmation of the reflationary environment taking hold. That’s what the Fed and the market should be wanting,” said Karyn Cavanaugh, chief investment officer at Carolinas Wealth Management, in an interview.
Investors saw more guidance from Federal Reserve speakers. Fed Gov. Lael Brainard said on Tuesday the U.S. economy is likely to experience a “burst” of short-lived inflation rather than a durable shift in price levels.
Brainard also said some of the interest-rate swings last week caught her eye, and that she would be concerned if it led to a tightening of financial conditions.
Over the past few sessions, investors have fretted that the Fed’s lack of reaction to higher bond yields could fuel further selling in the Treasurys market.
Meanwhile, concerns about bubbles and overvalued parts of the stockmarket in the U.S. and China were a source of concern for Chinese regulators . Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and Party secretary of the central bank warned at a briefing in Beijing that stock values were disconnected with economic fundamentals in the U.S. and Europe, reported Bloomberg News and Reuters .
Investors were also focused on developments on the vaccine front. President Joe Biden will announce later Tuesday that Merck & Co. Inc. (NYS:MRK) will help make Johnson & Johnson’s (NYS:JNJ) one-shot COVID-19 vaccine in an unusual agreement between two competitors that could lead to a significant boost in supply, the Washington Post reported Tuesday.
Looking ahead, markets may focus on Biden’s picks to lead the Securities and Exchange Commission, Gary Gensler, and the Consumer Financial Protection Bureau, Rohit Chopra, who are both participating in confirmation hearings before the Senate Banking, Housing and Urban Affairs Committee.
Which stocks are in focus?
Shares of Target Corp . (NYS:TGT) fell 6.7% after the discount retail giant reported fiscal fourth-quarter profit and sales that rose above expectations, boosted by growth in traffic and average ticket and as digital sales more than doubled.
Kohl’s Corp. (NYS:KSS) shares rose 0.7% after the retailer reported fourth-quarter earnings and sales that topped Wall Street forecasts .
Shares of Twitter Inc. (NYS:TWTR) fell 5.2% after the social media company announced the pricing of its $1.25 billion convertible debt offering .
Hertz Global Holdings Inc . (OTC:HTZGQ) on Tuesday filed a plan of reorganization with the U.S. Bankruptcy Court for the District of Delaware and said it expects to emerge from chapter 11 bankruptcy by early to midsummer.
AutoZone Inc . shares (NYS:AZO) rose 1.2%, after the car parts maker’s second-quarter earnings blew past estimates.
Shares of Lumber Liquidators Holdings Inc . (NYS:LL) fell 5.8%, after the hardwood-flooring retailer reported fourth-quarter profit and sales that beat expectations, while not providing financial guidance given uncertainties resulting from the COVID-19 pandemic.
Zoom Video Communications Inc. (NAS:ZM) slipped 9% after the video communications company reported fourth-quarter net income of $260.4 million, or 87 cents a share, compared with net income of $15.3 million in the year-ago quarter.
What are other markets doing?
Bond yields pulled back further . The yield on the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) fell 3.1 basis points to 1.413%. Yields and bond prices move in opposite directions.
Oil futures edged higher as traders await this week’s meeting of OPEC+ members , with the U.S. benchmark (NYM:CL.1) down by 89 cents, or 1.5%, to settle at $59.75 a barrel on the New York Mercantile Exchange. Gold futures (NYM:GC00) rose $10.60, or 0.6%, to settle at $1,733.60 an ounce , snapping a five-day losing streak ,
Equities rose in Europe , with the pan-European Stoxx 600 index (STOXX:XX:SXXP) up 0.2% and London’s FTSE 100 (FTSE:UK:UKX) gaining 0.4%.
Stocks advanced in Asia. The Shanghai Composite (SHG:CN:SHCOMP) and Hong Kong’s Hang Seng Index (HONG:HK:HSI) each rose 1.2%, while Japan’s Nikkei 225 (NIKKEI:JP:NIK) rose 0.9%.