NEW YORK, Feb 25 (Reuters) - Wall Street's main indexes recoiled from record highs on Thursday as surging U.S. Treasury yields took the shine off stocks now that a strong economic recovery looked more certain and investors clung to bets that inflation would rise.
The S&P 500 was down more than 2% at one point, and retreating technology stocks dragged the Nasdaq down more than 3%, as the benchmark 10-year note yields surged above 1.6% to the highest in a year, pushing safe-haven bonds into their biggest fall since May.
The Treasury note yield also rose above the 1.48% S&P 500 dividend yield, wiping out the strong advantage that the stock market has held over bonds during the pandemic.
COMMENTS:
ARNIM HOLZER, MACRO AND DEFENSE CORRELATION STRATEGIST, EAB INVESTMENT GROUP, PHILADELPHIA
“There is a concern that despite the Fed saying they are not going to do anything about interest rates, the level of inflation might get away from the Fed, and that will have a market impact…The Fed’s policy should be a calming message, but because of the amount of supply – Treasury debt – the market is beginning to interpret that as much more stimulus, without potential of a check or discipline. The fear is that excesses could develop in the meantime that twist risk-taking in the market to a place that is overly frothy. The market is trying to get ahead of that by getting conservative.”
“The (yield) curve is telling you that growth is coming back with a vengeance, and if the Fed is not going to do anything about it, then you can speculate with impunity. The institutional crowd has concerns that at some point if we mean-revert, it’s going to be the big-cap names that are a source of liquidity. They’re going to prepare for that.”
(Compiled by the Global Finance & Markets Breaking News team)
((alden. bentley@thomsonreuters.com; 646-281-6041;))
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