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Dow Slumps as Bulls Scatter on Sudden Spike in U.S. Yields

Stock MarketsFeb 25, 2021 03:38PM ET
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© Reuters

By Yasin Ebrahim

Investing.com – The Dow slumped Thursday, paced by a rout in tech stocks as a sudden spike in U.S. government bond yields on fears of faster inflation spooked investors and prompted them to rein in their bullish bets on stocks.

The Dow Jones Industrial Average fell 1.95%, or 642 points. The S&P 500 was down 2.78%, while the Nasdaq Composite fell 3.80%.

Technology fell 3%, resuming its recent slump after reprieve a day earlier, as the United States 10-Year jumped to a more than one-year high of 1.5%. Fears about rising inflation muddied the outlook for high-flying growth stocks. But with real rates, which takes into account inflation, still "negative," the overall environment for equities remains supportive, BlackRock (NYSE:BLK)'s Chief Investment Officer of Global Fixed Income, Rick Rieder told CNBC in an interview earlier Thursday.

Investors in growth stocks like tech, with high valuations, usually have to wait longer to recoup their investments, which is unattractive in an inflationary environment, where money today, is worth more than money in the future.

Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL) were sharply lower.

Twitter, however, traded against the trend, rising 6% after the social media company set out plans to boost monetizable daily active users to 315 million by 2023 and double revenue in that year.

In a further sign that high-growth stocks have lost their luster, stay-at-home market darlings like Zoom Video Communications (NASDAQ:ZM), Peloton Interactive (NASDAQ:PTON) and DocuSign (NASDAQ:DOCU) were nursing heavy losses, down more than 5% each.

The sharp pace of the uptick in rates has also sparked a jolt of volatility, pointing to underlying investor uncertainty, exacerbated by a renewed short-squeeze in shares of GameStop (NYSE:GME), which jumped 40%. The CBOE Volatility Index index, or VIX, jumped 44%.

Consumer stocks were also deeply in red on disappointing quarterly results, with Best Buy (NYSE:BBY) and Domino’s Pizza (NYSE:DPZ) down 9% and 8%, respectively.

Cyclicals like energy, financials and industrials, which tend to move in tandem with an improving economy were also shunned.

On the economic front, initial jobless claims dropped by a more than expected 111,000, to 730,000, while the U.S. fourth-quarter GDP was revised slightly higher to 4.1% from 4%.

Dow Slumps as Bulls Scatter on Sudden Spike in U.S. Yields
 

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Comments (14)
Dave Jones
Dave Jones Feb 25, 2021 4:11PM ET
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the initial headline was down a touch...9 points...when it was clear that a bloodbath was coming
Dr Gogu
Dr Gogu Feb 25, 2021 4:02PM ET
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wth.. bought last night, to fall hard today... what was all the deal with Powell reassuring the market and the solid green yesterday... *can't understand this darn market*
Radu Urjan
Radu Urjan Feb 25, 2021 4:02PM ET
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Yea, it s called bull trap. Been there done that...
Dr Gogu
Dr Gogu Feb 25, 2021 4:02PM ET
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Some are saying it's a bear trap... i.e. Stocks will go up from now on.. i sure hope so. The dems will sign the stimulus bill tomorrow..
Christian Buckley
Christian Buckley Feb 25, 2021 4:02PM ET
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I added a thoughtful comment to help but they review my comments before I post. hold, were at 8% off high for Nasdaq... we see 10% max imo. then crazy bull market.
Ethan Strong
Ethan Strong Feb 25, 2021 4:02PM ET
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Radu Urjan yes it was. Got me good today.
Mitchel Pioneer
Mitchel Pioneer Feb 25, 2021 3:51PM ET
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Ah yes, savvy "investors" pour in during the final 30 minutes of "trade" once again and mitigate the loss.  No such thing as closing low in the US Ponzi Scheme.
Fabio Oliveira
Fabio Oliveira Feb 25, 2021 3:51PM ET
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This is day traders short covering
Doitch Caso
Doitch Caso Feb 25, 2021 3:37PM ET
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Yo homies, my name is POWELL - I am feeling sick to my BOWEL- Because whether I like it or NOT - Can’t touch yields cuz they too HOT - So here is a ditty to hit the SPOT - Sing it with me like it’s all you GOT - Yeah - YCC, yeah you know ME - Yeah baby - YCC, yeah you know ME
Cal Lowe
Cal Lowe Feb 25, 2021 3:21PM ET
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buy the dip on amazon, alphabet, then watch it rise to new highs
taylor jason
taylor jason Feb 25, 2021 3:21PM ET
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works like clock work on average twice a year. what these articles fail to tell you is that we are coming off 3 solid months of gains
Semih Unalan
Semih Unalan Feb 25, 2021 3:19PM ET
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By the way all the Fed needs to do to pull yields down is to buy bonds. Not exactly a problem for an institution with the authority to print money...
Semih Unalan
Semih Unalan Feb 25, 2021 2:57PM ET
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They will regret this. Classic bear trap.
michael engel
michael engel Feb 25, 2021 2:05PM ET
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1) AMZN on dma200. FB crossed dma200, but MSFT stopped above dma50. AAPL in between. What's going on. 2) The future is deeply unknown. 3) Option #1 : a $1400 stimulus check to send SPX from below the value zone to 4K. 5)  Option #2 : IWM became so psychotic, big red supply bars on high volume will send  IWM to manic depression conditions.
James Dorward
James Dorward Feb 25, 2021 2:05PM ET
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unknown? what planet you on?
Star Boi
Star Boi Feb 25, 2021 2:01PM ET
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Yep, blame the 10 yield. Never mind the technical indicators were pointing to an over bought market that needed to catch its breath and inhale in an ABC correction. Nope, just keep pumping that liquidity and free money that tax payers are going to have to pay one day.....kicks can down the road once more (lol). Who needs air, right? We can live off money.....hmmmm, except if you get Covid....then you can't breath.
James Dorward
James Dorward Feb 25, 2021 2:01PM ET
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over bought? do you know anything about economics?
VietAnh Tran
VietAnh Tran Feb 25, 2021 2:01PM ET
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Too much a complaint. Can you do any better boy ?
Leo Woodsman
Leo Woodsman Feb 25, 2021 1:58PM ET
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No Trump, no twitter
Parekh Kar
Parekh Kar Feb 25, 2021 1:56PM ET
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sell tech and banksbuy energy, industrial this is where actual jobs are generated
New Jazenevd
New Jazenevd Feb 25, 2021 1:55PM ET
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Yield is up, because price of US bonds is down. This is the real story. The price is down because US prints out enormous amounts of “US bonds” that no one wants to buy unless the price is heavily discounted. A discounted country, shortly speaking.
Drupal Grupal
Drupal Grupal Feb 25, 2021 1:47PM ET
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the yields have already been going up for a year. in fact, they have doubled. and like anything else in this crazy market, the next 50% rise in the yields will be much quicker. this is not good for the US companies. And the reason is simple, the fed's monthly bond buying is now way too small for the size of financial markets. the fed can't do anything about it now because the pressure to scale it back is tremendous.
Kevin Nørregaard
Kevin Nørregaard Feb 25, 2021 1:47PM ET
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do you recon that we will see weimar inflation during the next couple og years?
Stan Smith
Stan Smith Feb 25, 2021 1:36PM ET
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Bears cheer???
Jacob Steinschlag
Jacob Steinschlag Feb 25, 2021 1:36PM ET
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*beers, cheers!
 
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