Day Traders Diary

3/18/21

The markets are mixed with the S&P 500 and Nasdaq lower on a spike in bond yields fueled fears of equity valuations and caused investors to sell growth-focused highflyers.

The tech-heavy Nasdaq Composite dropped 2.5% as Apple, Alphabet, Microsoft and Facebook all fell at least 2%. Tesla slipped more than 5%. The S&P 500 slid 1.1%, falling from a record closing high reached in the previous session. The Dow Jones Industrial Average last traded 70 points lower after hitting a new intraday record high earlier in the day amid a rally in bank stocks.

The 10-year Treasury yield jumped 11 basis points above 1.75% at its session high, reaching its highest level since January 2020. The 30-year rate also climbed 6 basis points at one point, breaching the 2.5% level for the first time since August 2019. The jump in bond yields came after the Federal Reserve expressed its willingness to allow an overshoot in inflation. Rising rates can have an outsized impact on growth stocks as they make their future returns less valuable today.

Bank stocks outperformed as higher interest rates tend to improve their profit margins. Banks can earn more from the widening gap between the rate they borrow at in the short term and the rate they lend out at in the long term. JPMorgan jumped 2%, while Goldman Sachs gained 1.9%. Citizen Financial popped 4% and Zions Bancorp rallied 3.6%.

Meanwhile, the Philadelphia Federal Reserve's manufacturing index showed a reading of 51.8, well exceeding Dow Jones consensus of 22.0 and hitting the highest level for the gauge since 1973.

The energy sector was the biggest loser with a 2.9% decline Thursday amid a drop in oil prices. WTI crude futures slid more than 7% to $60 per barrel, falling for a fifth straight day and suffering its worst day since September.