US Markets End Lower, Weighted Down By Tech Stocks, Consumer Cyclicals

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Summary

• S&P 500 shed 0.77%, NASDAQ was down 2.46%, and Dow Jones was up 0.09%.
• Technology, consumer non-cyclicals, healthcare, and utilities dragged down indexes.
• Bond yields signal higher optimism in the markets of a faster economic recovery.

US stock markets ended lower on Monday, weighted down by traditional blue-chip stocks which appeared less attractive as more options open-up for investors amid improvement in the economy.

The S&P 500 shed 0.77% to 3876.50. The Dow Jones Industrial Average was up 0.09% to 31521.69. The NASDAQ Composite Index was down 2.46% to 13533.05 and the small-cap Russell 2000 ticked down 0.69% to 2251.09.

Major tech stocks continued their descent after a sluggish start in the opening session. Market analysts attributed this low appetite for high-value stocks to the rising value of treasury bonds.

The 10-year US treasury bonds have seen considerable growth in the past few weeks, although they remained lower than the comparable period of 2019. However, it signalled a higher optimism in the markets of a faster economic recovery than it was previously predicted.

Investors were willing to explore other opportunities provided by the economic outlook, which meant they can now look into small-cap cyclical stocks that are expected to gain from a rebound.

Between November and now, companies with smaller market capitalization have grown faster than their bigger peers, growing by over 40 per cent, according to an estimate. It reaffirmed the increased interests of investors in these stocks, especially when the blue-chip scrips became more expensive. 

Also, new banking regulations in China, targeting online lenders, such as the Ant Group and other tech companies, weighed on the investors’ minds. As per the new rules, to be effective from 2022, online lenders must contribute 30% of the funds they make with traditional banking institutions.

Banks will also have to maintain a certain ratio while lending in partnership with their online affiliates. This is likely to impact their businesses since these limits may make borrowings difficult.

Airline stocks received a further jolt after Boeing decided to ground its 777 series of aircraft due to an engine problem. Boeing stocks (NYSE-BA) were trading lower on Monday after the news. One of its engines broke apart during a weekend flight, triggering a broader safety probe into its design.

Besides, traditional heavyweights in consumer non-cyclicals, healthcare, technology, consumer cyclicals, and utilities dragged down the indexes. However, stocks related to energy, financials, real-estate, industrials, and basic materials fared better.

Image Source: Pixabay

Also read: Bitcoin Joins the Trillion Dollar Club, Surpasses Facebook’s Market Cap

Top Gainers

Top performers on S&P 500 included People's United Financial Inc (14.99%), Royal Caribbean Cruises Ltd (9.86%), American Airlines Group Inc (9.50%), and Marathon Oil Corp (9.26%). On NASDAQ, top performers were Marriott International Inc (4.96%), Vertex Pharmaceuticals Inc (4.11%), Fox Corp (3.27%), and Fox Corp (3.17%). On Dow Jones, Walt Disney Co (4.46%), Caterpillar Inc (3.85%), American Express Co (3.10%), and Chevron Corp (3.10%) were among the leaders.

Top Losers

Top laggards on S&P 500 included Viatris Inc (-13.89%), Enphase Energy Inc (-10.66%), Tesla Inc   (-6.86%), and NRG Energy Inc (-6.77%). On NASDAQ, DocuSign Inc (-8.73%), Peloton Interactive Inc (-8.60%), Moderna Inc (-7.12%), and Tesla Inc (-7.70%). On Dow Jones, Intel Corp (-3.54%), Nike Inc (-3.36%), Apple Inc (-2.53%), and Microsoft Corp (-2.41%) were among the top laggards.

Image Source: Refinitiv, S&P 500 YTD price chart, 22 February 2021

Volume Movers

Top volume movers included Apple Inc (15.59mn), Microsoft Corp (7.66mn), Tesla Inc (6.65mn), Advanced Micro Devices Inc (6.33mn), American Airlines Group Inc (16.51mn), General Electric Co (11.40mn), Ford Motor Co (8.92mn), Microsoft Corp (7.66mn), Intel Corp (4.03mn), Cisco Systems Inc (3.70mn), and Boeing Co (2.19mn).         

Futures & Commodities

Gold futures were up 1.69% to $1,807.85 per ounce, silver was up 3.65% to $ $28.250 per ounce, while copper gained 1.51% to $ $4.1355.

Brent oil futures for April delivery was up 3.56% to $64.35 and WTI crude futures for March delivery edged up 3.98% to $61.62.

Bond Market

The yield on the US 30-year Treasury bond was up 1.42% to 2.170. The yield on the 10-year US Treasury bond was up 1.26% to 1.362.

US Dollar Index Futures was down 0.28% to 90.108.

Cryptocurrencies

Bitcoin surged to $1-trillion market capitalisation after it surpassed the $55,000 mark per coin. With this new feat, the digital currency no joins other members of the trillion-dollar club such as Microsoft, Amazon, and Google. It has also surpassed Facebook’s $753 billion market cap.

Also read: Cargojet (TSX:CJT) & Boeing (NYSE:BA): 2 Aviation Stocks To Explore

Overall, the market sentiment remained positive, buoyed by optimism of quicker economic recovery.

Since taking office, President Biden has approved several tranches of his $1.9 trillion economic stimulus package which included relief for the unemployed households and small businesses.

Vaccine production has been ramped up to meet the maximum number of people in a shortest possible time, which has helped reduce the number of new infections.

This has had a positive impact on the bond market as treasury yields rose in recent months. Falling bond prices also indicated positive sentiment of a faster growth.