The New York Stock Exchange ended in the red Tuesday, weighed down by the rise in the US 10-year bond rate and the strength of the dollar against other major currencies.
The Dow Jones Industrial Average, which hit a record Monday at the close, fell 0.31% to 33,066.96 points. The Nasdaq, with strong technological coloring, yielded 0.11% to 13,045.39 points and the extended S&P 500 index fell 0.32% to 3,958.55 points. “The US market ended lower after a volatile session that saw yields on Treasuries climb before the opening,” noted analysts at Charles Schwab.
After a lull last week, the 10-year rate on the US debt started to rise again, reaching overnight from Monday to Tuesday a 14-month high, at 1.7742%. The greenback, for its part, hit a one-year high against the yen and since November against the euro. The upward movements in bond yields and the dollar indicate that market participants anticipate a strong recovery in consumption and a resumption of growth in the United States thanks to the fiscal stimulus and the vaccination campaign. This sentiment was confirmed with the clear improvement in US consumer confidence in March, to its highest in a year, according to the Conference Board index released on Tuesday.
But these expectations weigh at the same time on values which had climbed on the stock market thanks to the lockdowns, in particular those of large technology companies like Apple (-1.23%), Microsoft (-1.44%) or Facebook (- 0.97%).
The banking sector affected by the Archegos affair
For its part, the banking sector is pleased with the rise in rates on Treasury bills, and therefore potentially an increase in interest rates, which means greater margin for financial institutions. Morgan Stanley (+ 1.55%) and Goldman Sachs (+ 1.93%) thus recovered after a difficult session the day before. The two American banks had been caught in the turmoil of the Archegos Capital Management affair, a New York-based investment firm, which sold off en masse stakes in American and Chinese companies listed on Wall Street. The media groups ViacomCBS (+ 3.55%) and Discovery (+ 5.36%), affected by this sale, rebounded on Tuesday.
Waiting for the Biden plan
“The market is awaiting (Joe) Biden’s infrastructure plan, which is supposed to be announced tomorrow,” said Peter Cardillo of Spartan Capital. The American president must indeed unveil on Wednesday investments to renovate and modernize the country’s bridges, roads, railways and airports, the amount of which could reach 3 trillion dollars. The financing of this expensive project raises many questions in financial circles, in particular because of a possible increase in the tax on companies and on the greatest fortunes, mentioned by the Biden administration.