The S&P 500 ended slightly higher on Friday as financial stocks rose after the benchmark Treasury yield hit its highest level in nearly three years, while technology and other growth big names fell. . The S&P 500 financials sector gave the S&P 500 its biggest boost, while technology was its biggest drag.
For the week, the S&P 500 and Nasdaq posted gains and the Dow was close to flat. Investors are pricing in how aggressive the Federal Reserve will be as it tightens policy after Fed Chairman Jerome Powell said this week that the central bank needed to act “quickly” to tackle high inflation and has raised the possibility of a 50 basis point rate hike. in May.
The yield on the 10-year Treasury note exceeded 2.5%. The stock market is moving in a higher rate environment, said Keith Buchanan, portfolio manager at Globalt Investments in Atlanta.
That’s causing bank stocks to outperform, while “adding more pressure on riskier parts of the market,” such as growth stocks, he said. Higher rates tend to be negative for technology and growth stocks, whose valuations depend more on future cash flows.
The defensive S&P 500 utilities index, which is considered a bond proxy, hit a record high. According to preliminary data, the S&P 500 gained 23.78 points, or 0.53%, to end at 4,543.94 points, while the Nasdaq Composite lost 21.86 points, or 0.15%, to 14 173.22. The Dow Jones Industrial Average rose 153.40 points, or 0.44%, to 34,861.34.
Shares of growth companies such as Microsoft Corp and Nvidia Corp fell after leading a rebound on Wall Street this week. Wells Fargo & Co shares gained. “The market is really macro-driven,” said Steve DeSanctis, small-mid cap equity strategist at Jefferies in New York. “The fundamentals of the business don’t really matter.”
Citibank economists expect four 50 basis point interest rate hikes from the Fed this year, joining other Wall Street banks in forecasting aggressive tightening amid galloping inflation. The U.S. central bank last week raised interest rates for the first time since 2018.
The conflict between Ukraine and Russia will keep investors nervous over the weekend. Moscow has signaled that it is scaling back its ambitions in Ukraine to focus on territory claimed by Russian-backed separatists. (Additional reporting by Devik Jain and Amruta Khandekar in Bengaluru; Editing by Marguerita Choy)
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)