Equities were mixed on Monday, with growth stocks continuing their recent trend to outperform value stocks, as the 10-year Treasury yield fell to 1.47%. The Nasdaq Composite S&P 500 closed at record highs.
Dow Jones Industrial Average
slipped 151 points, or 0.44%. But the
rose 0.23% and finished at a new high of 4,290.61. the
rose 1% to a record 14,500.51.
Falling bond yields increase the value of future earnings, and growth stocks rely on growing earnings over the longer term. Value stocks, on the other hand, tend to recover when investors anticipate stronger economic demand. Over the past month, the high-growing Nasdaq has risen 5.5%, while the value-driven Dow is down 0.84% and the 10-year Treasury yield has fallen from a recent peak of 1.61%.
“Stocks do what stocks do, when 10 years go down the return on high tech (long-lived stocks) goes up,” writes Andrew Brenner of NatAlliance Securities.
One of the fears over value stocks is that a Fed rate hike will slow economic growth. Investors were watching for comments from New York Fed Chairman John Williams and comments from Fed members Patrick Harker and Randal Quarles made on Monday. These speakers did not appear to be making comments that could change the market outlook on future short-term interest rates and bond yields. Recently, the market has been sensitive to hawkish comments – words that make higher interest rates more likely – from the Fed.
This same fear of slowing economic growth is a factor weighing on the yield of the 10-year Treasury. The decline in yields is “indicative of a lack of conviction in the market about the degree to which economic growth is slowing,” said Mark Luschini, chief investment strategist at Janney Capital Management.
Although two of the three major US indices rose, most stocks fell, reflecting low confidence in long-term economic growth. About 62% of S&P 500 stocks fell, according to FactSet. The small scale of rising stocks is in part attributable to “this concern about peak growth,” said Erik Knutzen, investment director for multi-asset class strategies at Neuberger Berman.
Looking ahead, “Many are already eyeing the macroeconomic data ahead, with this week’s US jobs report due on Friday as the earnings season looms large,” analyst Pierre Veyret said. technical at ActivTrades.
Meanwhile, Asian markets edged down as authorities put new restrictions in place to tackle a wave of new coronavirus cases. the
slipped 0.1% to pace a slight decline in the region.
Thailand banned food services for a month, Malaysia extended the lockdown, and screening orders were imposed in Sydney, Australia.
Stoxx Europe 600
Virgin Galactic Holdings
(ticker: SPCE) the stock fell 1.9% after initially gaining after the Federal Aviation Administration cleared the company to send customers into space.
Shares (TOL) gained 0.88% after being upgraded to Sell Neutral at BTIG.
The stock (CRM) rose 0.73% after Redburn launched a cover with a buy note.
British luxury goods group shares
fell 8.67% in London trade after Marco Gobbetti announced he would leave the company at the end of the year to take on the same role at the leather goods maker
in his native Italy. Burberry said it has started looking for its successor.
Write to Jacob Sonenshine at [email protected]