The Nasdaq sold off after the 10-year Treasury yield spiked to its highest levels of the year following the passage of the $1.9 trillion Biden stimulus plan. The Dow Jones Industrial Average continued to rally, however, with Boeing (BA) the standout blue chip performer. Meanwhile, Warren Buffett stock StoneCo (STNE) fell hard on weak earnings.
Apple (AAPL) and Intel (INTC) were among the day’s losers, while Tesla (TSLA) and Nio (NIO) eased after a rebound.
The 10-year Treasury yield spiked as high as 1.635%, the highest level of the year so far. The 30-year Treasury bond yield also rose. Higher current inflation and higher expected inflation causes yields to rise. This is because investors will demand a higher yield to compensate for inflation risk.
Some economists have warned the $1.9 trillion stimulus bill, which President Joe Biden signed Thursday, may fuel inflation. Oanda senior market analyst Edward Moya believes Federal Reserve Chairman Jerome Powell could be forced to adopt a more proactive tone during next week’s Federal Open Market Committee policy meeting.
“Prior to today, bond yields appeared to be stabilizing and many analysts were expecting next week to be an easy FOMC policy meeting that was going to deliver much of the same rhetoric from Fed Chair Powell,” he said in a note to clients. “If the bond market sell-off intensifies leading up to the March 17th FOMC decision, the Fed may finally have to push back against the move in Treasury yields.”
Nasdaq Dives; S&P 500 Slips
The Nasdaq dropped around 1%, though it was off lows. China stock JD.com (JD) was the worst performer in the composite, slipping almost 7%. DocuSign (DOCU) was another big loser.
The S&P 500 was down a more marginal 0.2%. Ulta Beauty (ULTA) fell almost 9% on weak earnings. The next worst performer was PerkinElmer (PKI), which posted a more moderate drop of just over 3%.
Volume was lower compared to the same time Thursday. Trading slipped 6% on the Nasdaq and tumbled 16% on the NYSE.
The S&P sectors were mixed, with financials leading. The biggest laggards were technology and communication services.
Growth stocks were also forced lower, with the Innovator IBD 50 ETF (FFTY) losing around 0.4%.
Boeing Climbs, Helps Lift Dow Jones
The Dow Jones Industrial Average was the best performing major index, rising around 0.6%
Boeing was the top performing component, climbing more than 6%. It has soared out of the buy zone after passing a cup base buy point of 244.18, MarketSmith analysis shows. Earnings remain weak, however.
Apple stock was among the Dow’s biggest losers, falling more than 1%. Apple has been slipping closer to its 200-day line, and is below its 50-day line. The relative strength line for Apple stock needs to improve, as it has been dipping since late January.
Intel was another laggard after dipping more than 1%, but the worst performer on the Dow was Salesforce.com (CRM). The latter was down almost 2%
Warren Buffett Stock Drops On Earnings
StoneCo is falling further below its 50-day moving average. The stock dropped after reporting Q4 earnings fell 8% to 22 cents a share.
Warren Buffett is a big backer of StoneCo. His Berkshire Hathaway (BRKB) holds 14.17 million shares, which accounts for more than 6% of all StoneCo stock.
Bank of New York Mellon (BK) managed to pass a buy point at 46.94 but was stalling at that level. The stock boasts a poor IBD Composite Rating of 49, however, with both earnings and stock market performance mediocre. Banks struggle to eke out profits when interest rates are low.
Tesla Stock, Nio Stock Stall
Tesla stock stalled again following Thursday’s gain. It was down around 2%. Nevertheless, it is on track to post a weekly gain of around 15%. Tesla’s RS line is improving after a recent plunge.
Tesla stock has already crashed through its 50-day moving average but held well clear of its 200-day line. It has a Composite Rating of 94. Tesla stock’s recent poor performance saw it lose its spot on Leaderboard.
Chinese rival Nio also slipped, though it pared losses. It is down around 1.5%. It is on track to gain around 19% for the week. Nio stock remains marooned below its 50-day moving average, but is now well clear of its 200-day line. The stock collapsed after a breakout from a 57.30 entry failed.
