The Nasdaq dropped 1.9%, while the yield on 10-year Treasury notes dropped to 1.557%
World equity indexes slid and US Treasury yields fell on Tuesday as low trading volume, a lull in economic news, and lack of a catalyst to lift stocks higher sparked a sell-off by investors worried further upside in markets is limited.
The tech-rich Nasdaq dropped 1.9%, its biggest single-day decline in nearly 6 weeks, while the yield on 10-year Treasury notes dropped to a low of 1.557%, a slide that normally would push technology shares higher on lower financing costs.
A surge in commodity prices bucked the downdraft in equity markets, helping spur talk of rising inflation, while the dollar gained after US Treasury Secretary Janet Yellen said interest rates may need to rise to prevent overheating the US economy. Yellen later downplayed inflation and rate hike concerns.
The Refinitiv/CoreCommodity CRB Index traded near 3-year highs as commodities rallied on investor bets that demand will grow as economies reopen.
Investors sold the high-flying tech-related stocks that have doubled the value of the Nasdaq since March 2020 lows, and bought government debt, pushing yields lower.
Apple, Amazon, and Microsoft led the decline on Nasdaq and the S&P 500.
There’s not a lot of conviction among traders of which way markets should go from here, said Patrick Leary, chief market strategist and senior trader at Incapital. We’ve priced in a great amount of reopening optimism.
MSCI’s benchmark for global equity markets declined 0.81% to end at 697.60.
On Wall Street, the Dow Jones Industrial Average advanced 0.06%, the S&P 500 shed 0.67%, and the Nasdaq Composite fell 1.88%.
Economically sensitive value stocks eked out a gain of 0.04%, outperforming a 1.6% slide in growth stocks. After Tuesday’s slide, the Russell 1000 Value Total Return Index has nearly tripled the performance of the Russell 1000 Growth Total Return Index so far this year.
European tech stocks tumbled 3.8% in their worst day since late October. Germany’s bourse shed 2.5%, the most in Europe, due to its high composition of tech stocks.
Chipmaker Infineon dropped 5.9%, among the top drags on the German index, after the company said automotive supply constraints would only ease in the 2nd half, with lost volumes likely to be made up in 2022.
Scepticism crept into the Treasury market that upcoming economic data might not be as stellar as the market has priced in, keeping a damper on longer-dated bonds. The benchmark 10-year Treasury note last yielded 1.587%.
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