Jakarta, CNBC Indonesia – United States (US) stock exchanges swung into the red in the early trading session Friday (12/3/2021), following concerns over the effects of rising yields (yield) US government bonds on the performance of technology issuers.
The Dow Jones Industrial Average rose 10.2 points (+ 0.03%) at 8:30 am local time (21:30 WIT) and 20 minutes later to 115.7 points (+ 0.36%) to 32,601.31 . The S&P 500 dipped 10.6 points (-0.27%) to 3,928.77 and the Nasdaq fell 151.7 points (-1.13%) to 13,246.96.
Today’s correction was led by Tesla shares which fell more than 3%, followed by Netflix and Facebook shares which fell 2%, as well as shares of Apple, Amazon and Microsoft which were down by around 1%.
On Thursday, the S&P 500 index jumped 1% to hit a new record high last touched on February 16. The Dow Jones Industrial Average closed up 188.6 points while the Nasdaq rocketed 2.5%.
“Yield and a less dovish central bank are now seen as the biggest threat to the stock market, “said Ralf Preusser, Bank of America’s debt investment planner. CNBC International.
According to a report by Ned Davis Research, Nasdaq is at risk of falling another 20% if the yield on the 10-year government bond, which is the benchmark for the bond market, strengthens to a psychological level of 2%.
However, the increase in yield on US government bonds put pressure on their performance due to the nature of their business, which is indeed capital intensive and likes to issue debt securities. Tonight, the yield on the 10 year tenor US government debt increased again, by 8 basis points, to 1.61%.
During the week, the Nasdaq raced 3.7% and overtook the performance of the S&P 500 and Dow Jones indexes yield the market reference is still stuck at its highest level at 1.53%. On the other hand, the economic recovery encourages investors to hunt for cyclical stocks that will benefit when the pandemic ends.
Signals of US economic recovery became clearer after Biden signed a jumbo-sized pandemic stimulus. The stimulus included direct cash transfers (BLT) of US $ 1,400 to US citizens, funding of a US $ 20 billion vaccination program and US $ 350 billion in aid to local and federal governments.
Biden announced Thursday that all adults in the US will be vaccinated by May 1. Another positive sentiment came from jobless claims which showed weakness.
CNBC INDONESIA RESEARCH TEAM
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