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Investing.com – The S&P 500 retreated Wednesday, paced by a decline in tech after U.S. bond yields jumped above pre-pandemic levels ahead of the Federal Reserve’s rate decision, putting high-value growth names in the crosshairs.
The Dow Jones Industrial Average rose 0.16%, or 53 points, and had hit intraday record of 32,965.20, and the S&P 500 fell 0.46%, and the Nasdaq Composite was down 1.02%.
Tech’s strong start to the week has come under fresh attack as the U.S. 10-year Treasury yield climbed to a 13-month high on expectations that the Federal Reserve is unlikely to flag rising bond yields as a concern.
FAANG, with the exception of Amazon.com (NASDAQ:AMZN), led the decline on Wall Street as growth stocks – with longer payoff periods – are less attractive in a rising rate and inflationary environment, where money today, is worth more than money in the future.
Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Google-parent Alphabet (NASDAQ:GOOGL) and Netflix (NASDAQ:NFLX) slipped into the red.
Some, however, suggest the hit to highly valued growth names from rising yields on inflation jitters are somewhat overdone as rates are normalizing amid an improving economic backdrop.
“The market’s reaction, especially to the highly valued names, and the expectations for inflation moving forward are currently overdone right now,” David Wagner, a portfolio manager at Aptus Capital Advisors, said in an interview with Investing.com.
“This [the rise in bond yields] is just a normalization in rates … if you go back to previous cycles, rates tend to average about 200 basis points off the bottom on the 10-year Treasury yields in the first year and that’s really just what we’re seeing now,” Wagner added.
Semiconductor stocks also played in the broader market selloff, with SOXX falling nearly 1%.
Crowdstrike Inc (NASDAQ:CRWD), up 3%, bucked the trend lower in tech after reporting “very strong” quarterly results that topped Wall Street expectations on both the top and bottom lines.
Crowdstrike’s very strong Q4 was driven by record “customer wins of 1,480 and record net-net average recurring revenue of $143M that resulted in 75% ARR growth, which beat consensus expectations of 68% and was better than most investors expected,” RBC said as it raised its price target on the stock to $450 from $420.
In keeping with the recent trading action, the selloff in growth proved to be value’s gain as cyclical stocks – those that move in tandem with economy – were in favor.
Industrials were pushed higher by General Electric (NYSE:GE) and Caterpillar (NYSE:CAT), with the latter up more than 2%.
Energy was pressured by lower oil prices as a smaller-than-expected build in inventories was offset by a unexpected build in products like gasoline suggesting the recent lull in refinery activity is on the road to normalizing.
In another sign that the reopening is gathering pace, Walt Disney Company (NYSE:DIS) said it will open its flagship Disneyland theme park on Apr. 30. Its shares were flat.
