S&P 500 Cuts Losses as Yield Surge Renews Bets on Reflation Trade

© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 pared its losses Friday, as cyclical sectors continued to rack up gains as the reflation trade gathers pace in the wake of rising Treasury yields.

The fell 0.05%, the slipped 0.04%, or 14 points, the Nasdaq fell 0.27%.

“The reflation trade is reflating, as 10-year yields break through some initial resistance,” said Mark Luschini, chief Investment strategist at Janney Montgomery Scott  in a note. “Small-caps, value stocks, and banks/financials … continue to be powered by a strong correlation to trends on the Treasuries.”

Rising yields – supported by expectations for tighter Federal Reserve monetary policy has steadied fears about the economy at a time when concerns about Chinese real estate developer Evergrande continue to linger.  Evergrande was due to make $84 million in coupon payments on Thursday, but bondholders are still waiting on it.

“Focus on the 10-year treasury … that’s a key indicator of a global economy that is doing well,” Darren Schuringa, CEO of ASYMmetric ETFs told investing.com earlier this week. “Longer-term, we need strengthening global GDP growth to sustain the rally [in equities].

Energy and financials were the biggest gainers on the day, with latter benefiting from an ongoing move higher in bank stocks.

Lincoln National (NYSE:), Raymond James Financial (NYSE:), Truist Financial Corp (NYSE:) were up more than 2%.

In tech, Facebook (NASDAQ:) continued to recover losses from earlier this week,  helping the broader tech sector pared some of its intraday losses.

Roku (NASDAQ:) slipped 2% after Wells Fargo downgraded the company to equal weight from overweight, and cut its price target on the stock to $388 from $450, citing expectation for slower revenue growth ahead.

See also  Abbott beats profit estimates as medical device sales rebound

Nike (NYSE:) cut its revenue forecast amid ongoing supply chain issues that led to a fiscal first-quarter revenue miss, sending the sportswear giant’s shares down 3%.

Still, some on Wall Street believe the slump in Nike is a buying opportunity.

“We expect supply chain issues to prove transitory and recommend clients use any related nearer-term share price weakness as a buying opportunity,” Oppenheimer said in a note.

In other news, cryptocurrency-related stocks were hurt by a further crackdown on crypto in China.

China’s central bank deemed all digital currency activities illegal and vowed to crack down on the market.

Robinhood Markets (NASDAQ:), Coinbase (NASDAQ:), Marathon Digital (NASDAQ:) were in the red.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

See also  U.S. shares higher at close of trade; Dow Jones Industrial Average up 0.42%



Please enter your comment!
Please enter your name here