Stocks End Mixed: Tech Stocks Fall On Profit Booking
5:03 pm Tuesday, January 04th, 2022
Stocks turned mixed on Wall Street Tuesday as traders review the latest batch of economic reports after the year-end holidays.
Specifically, the 10-yr yield is up five basis points to 1.68% (+17 bps this year) while the 2-yr yield has slipped two basis points to 0.76%. Accordingly, the Russell 3000 Growth Index is down 0.5% while the Russell 3000 Value Index is up 1.6%.
From a sector perspective, the cyclical S&P 500 energy (+3.7%), financials (+2.8%), and industrials (+2.0%) sectors are up between 2-4%. Conversely, the information technology (-1.6%) and health care (-1.3%) sectors are down more than 1.0%.
Interestingly, the Nasdaq was trading higher by 0.1% in early action, even as yields were trending higher. While there was still a growth/value divergence at that time, it wasn’t as sharp as it is now.
Analysts on Wall Street have been calling for a higher interest-rate environment in 2022, so to see the 10-yr yield up 17 basis points in less than two days has probably had a self-reinforcing view on trading dynamics. In other words, market participants who at first didn’t see the rise in rates as noteworthy, now believe it’s a trend that’s here to stay because of the way the market has reacted.
That trend could make it a tough year for highly-valued growth stocks, which helps explain their negative price action intraday, but bode favorably for the bank stocks. The SPDR S&P Bank ETF (KBE) was up 3.5%.
Another factor today is the December ISM Manufacturing Index. While the index decelerated to 58.7% (consensus 60.3%) from 61.1% in November, it still denoted an expanding manufacturing sector as pricing pressures cooled off.
Ford Motor (F) is one beneficiary of the preference for value stocks, as it rises 12%, but it’s backed up its performance with a pleasing announcement. The company said it’s planning to double production capacity of its all-electric F-150 Lightning to 150,000 vehicles per year.
