Technology stocks popped on Friday, while the Dow Jones Industrial Average fell and bond yields dipped alongside a new surge in Covid-19 cases.
The Dow slid 269 points, or 0.8%, after the index slipped 60 points Thursday to close at 35,870. The S&P 500 fell 0.1% after the index closed at a new record Thursday. The technology-heavy Nasdaq Composite, meanwhile, advanced 0.4% and closed at a new high. The Nasdaq outperformed the Dow on Friday by the largest percentage point differential since Sept. 30.
For the week, the Nasdaq gained 1.2%, with investors not wanting to miss the “momentum” in tech stocks. The S&P 500 rose 0.3% during that same time period, while the Dow dropped 1.4%.
“You’re starting to get more nervousness about rollback responses to Covid, primarily in Europe,” said David Donabedian, chief investment officer of CIBC Private Wealth, U.S. “We’ve seen this knee jerk [reaction] before.”
The 10-year Treasury yield fell to 1.54% from a Thursday close of 1.61%. That’s a steep drop for one day, bringing it farther below its second half 2021 peak of 1.7%, hit in late October.
That bodes well for the tech trade. Lower bond yields make futures profits more valuable—and fast-growing companies in the sector are expecting a large share of their profits to come many years down the line.
Ultimately, market participants rushed into safety Friday. The drop in the yield means investors bought up the bond, sending the price higher. This came as new Covid-19 cases perked up in Europe, prompting Austria to announce lockdowns beginning next week.
Meanwhile, vaccine developments have been moving in the right direction. The Food and Drug Administration granted emergency use authorization for Moderna (ticker: MRNA) and Pfizer (PFE) vaccines for those 18 or older.
The stock market wasn’t exactly in panic mode on Friday. Only a slight majority of S&P 500 stocks were in the red, according to FactSet. Most of those stocks didn’t take major hits, either.
“Nothing is really down huge,” said Larry Adam, chief investment officer at Raymond Jaymes. “If it wasn’t for energy and the [Covid] headline, people would say the market is consolidating.”
“Consolidation” just means the stock market is seeing slowing gains, or a decline for a short period of time, before getting hot again.
The price of oil also dropped. WTI crude oil fell 3.7% to $76.11 a barrel. It’s down about 10% from its 2021 high of just over $84 a barrel.
Oil stocks slid, too. The Energy Select Sector SPDR Fund (XLE) fell 3.9%. It’s down just over 7% since the end of October when it hit a 2021 high.
Overseas, Hong Kong’s Hang Seng Index fell 1.1%, underperforming other bourses in Asia as it was weighed down by a stark fall in Alibaba (ticker: BABA and 9988.H.K.) stock following the Chinese e-commerce giant’s quarterly results Thursday that showed slowing growth. The pan-European Stoxx 600 fell 0.3%.
These fives stocks were on the move Friday:
Nvidia (NVDA), which has been on a tear this week—up almost 8% over the last five days—rose again, climbing 4.1%.
Write to Jacob Sonenshine at [email protected]