The dollar was the only winner at the close of trading in the markets, as US stocks fell due to technology losses, and the “European” was no better.
US stocks tumbled, led by technology
The Nasdaq Composite Index closed sharply lower today, Wednesday, after investors sold off high-tech stocks and headed to sectors expected to benefit from the economic recovery on the back of fiscal stimulus and vaccination programs.
Shares in Microsoft, Apple and Amazon.com declined, and had the most negative impact on the performance of the Standard & Poor’s 500 Index.
The financial and industrial sectors indices rose to new levels during the session, while most of the other sectors fell on the Standard & Poor’s.
“Today is a perfect example of the key feature we’ve observed in the last two months: the vaccine rollout is going well and the economy is improving, which is raising bond yields and interest rate expectations, and hurting growth stocks,” said Ross Mayfield, an investment planner at Bird in Louisville, Kentucky.
According to unofficial data, the Dow Jones Industrial Average fell 119.08 points, equivalent to 0.38% to 31272.44 points, Standard & Poor’s lost 50.46 points, or 1.30%, to record 3,819.83 points, and Nasdaq fell 361.04 points, or 2.7%, to 12997.75 points.
Higher yields and inflation expectations nullify European equities gains
European stocks closed flat on Wednesday, as gains in sensitive sectors of the economy offset the impact of an increase in bond yields, as investors’ expectations of inflation rise this year.
Car and travel stocks were the best performing today, while British stocks rose after Finance Minister Rishi Sunak extended programs to support the economy during the Covid-19 pandemic.
Strong expectations for Stilantis supported the automotive sector.
The pan-European STOXX 600 index closed substantially flat after it opened higher, and utility stocks topped the losses in the euro zone.
Utility stocks are a traditional follower of bond performance, as they are usually sold when debt instruments provide relatively higher returns.
European bond yields rose today, while a gauge of long-term eurozone inflation expectations rose to its highest level since May 2019.
Healthcare and technology stocks also incurred big losses, as focus shifted from relatively safe stocks to sectors likely to benefit from the economic recovery.
German shares closed 0.3% higher, as investors expect a gradual easing of restrictions linked to the Coronavirus as the vaccination campaign speeds up after a slow start. But losses in major technology stocks contributed to their decline from record highs reached earlier in the session.
Dollar is rising in anticipation of US growth
The dollar rose Wednesday, as investors expected strong US growth compared to other regions, while the safe-haven Japanese yen fell to its lowest level in seven months.
Investors’ bets have increased on US growth and rising inflation as the government is working on new financial stimulus, while speculation is growing that the Federal Reserve may be closer to normalizing monetary policy than it had previously thought.
“Today’s market focus on growth spreads between a recovering United States and Europe falter,” said Joe Manembo, senior market analyst at Western Union Business Solutions in Washington.
Data released today showed that the recession has almost certainly renewed in the euro area, in light of the continued shutdowns of Covid-19 that plague the services sector.
US data showed that private sector jobs rose by 117,000 last month, which fell short of expectations.
But “employment is expected to be strong” when the US releases February numbers on Friday, Manembo said.
The dollar index rose 0.14% to 90.924, while the euro fell 0.19% to $ 1.2068.
The Japanese Yen continued its decline, reaching 107.15 yen per dollar, its weakest rate since July 23.
The pound stabilized against the dollar today and rose against the euro after the announcement of a huge budget aimed at revitalizing the British economy, which is preparing to exit from closures.
The sterling rose 0.03% to $ 1.3955.