Thu. Jan 20th, 2022

Technology stocks bounced back from earlier losses in turbulent trading on Thursday, after a mixed bag of economic data clouded the investment outlook for equities likely to benefit from a reviving economy.

Wall Street’s technology-heavy Nasdaq Composite stock index, which fell 3.3 percent Wednesday, in its worst session since February 2021, has fallen even further in morning trading in New York before returning to a gain of 0.4 percent for the day.

The whiplash movements followed poor service data, which signaled continued supply chain disruption, and higher-than-expected initial jobless claims – causing a pause in the move away from high-value technology stocks that are considered the short-term crash of a reviving economy. The weaker data on Thursday contrasted with numbers on Wednesday showing an increase in private payrolls and higher than forecast manufacturing data.

Markets have entered an “unstable equilibrium”, according to Alex Veroude, chief investment officer for North America at Insight Investment.

He noted that minutes of the latest Fed meeting released on Wednesday – which showed the US Federal Reserve could move to raise interest rates faster and tighten financial conditions faster than expected – accelerated the move away from shares in interest rate-sensitive technology companies.

“I think everyone is thinking today about how falcon the Fed is really going to be,” he said. “I think it will take time for people to formulate a view.”

The blue-chip S&P 500 index also moved back from earlier losses to trade 0.3 percent, with shares of major technology groups driving both sides of the benchmark’s performance.

Companies including Apple and Tesla downgraded the index with losses of 1 percent and 1.4 percent, respectively. Facebook parent Meta Platforms, Nvidia and Alphabet pulled it higher with moves of more than 4 percent, 1.6 percent and 1 percent, respectively.

The Ark Innovation exchange-traded fund, which is now being watched, also recovered from earlier losses on Thursday to trade 0.6 percent in the New York afternoon. Nevertheless, this remains about 8.5 percent lower for the year to date, after a sharp decline in 2021.

Overall, the energy sector led the S&P 500 to a 1.3 percent rise in the price of Brent crude oil to $ 81.81 a barrel.

In Europe, the local Stoxx 600 stock meter closed 1.3 percent lower and in Asia, Japan’s Nikkei 225 closed about 2.9 percent lower. China’s CSI 300 fell 1 percent. However, Hong Kong’s Hang Seng index rose 0.7 percent as heavy declines for Chinese technology stocks reversed.

“Markets wake up to the end of easy money,” says Olivier Marciot, cross-asset investment manager at Unigestion.

“We’ve had a lot of quantitative easing and monetary support, which creates an environment where all assets tend to thrive, and when you remove them, it’s the other way around,” he added.

Government bond yields rose during the New York morning as investors continued to sharpen an accelerated pace of central bank policy.

The yield on the 10-year U.S. Treasury benchmark, which rises as the price of the government debt instrument falls, added about 0.02 percentage points to 1.73 percent. Yet it was a slowing pace in a sell-off that pushed key debt yields – which affect borrowing costs and asset valuations worldwide – up about 1.51 percent at the start of this week.

European government bonds were also wiped out in post-Fed sales. Germany’s 10-year bond yield rose to minus 0.07 percent, its highest level since May 2019. Riskier eurozone debt was also hit, with Italy’s 10-year yield climbing above 1.3 percent for the first time since July 2020 has, before it relaxed slightly.

Additional Reporting by Tommy Stubbington

Unsecured – Markets, finance and strong opinion

Robert Armstrong dissects the major market trends and discusses how Wall Street’s best minds react to them. Sign in here to have the newsletter sent straight to your inbox every weekday

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