2023-08-17 20:01:31
The New York Stock Exchange ended in the red on Thursday for the third straight session as long-term bond yields continued to climb.
The Dow Jones index lost 0.84% to 34,474.83 points, the technology-dominated Nasdaq fell 1.17% to 13,316.83 points and the S&P 500 fell 0.78% to 4,370, 36 dots.
Bond yields on ten- and thirty-year Treasury bills reached 16-year highs in session, at 4.30% and 4.40%, already hit in October 2022 when US inflation was raging.
“I did not expect ten-year rates to climb to 4.30%. This is really what drives the multiple down”, explained Jack Ablin of Cresset Capital referring to the “Price-earnings ratio ” (PE), or the ratio of a company’s market capitalization to its net income.
“The current level of bond yields suggests a PE at 17, but the average ratio for S&P 500 companies is currently at 21,” he explained.
All S&P sectors ended lower except for energy. The higher bond yields rise, the more it will cost companies to finance their development, which penalizes their actions.
The big names in technology have weakened like Apple (-1.46%), Amazon (-0.81%), Meta (-3.13%) or Netflix (-3%).
“Stock markets will remain under pressure until this rise in yields reverses,” added the Cresset Capital analyst.
For Joe Manimbo of Convera Financial Services, the rise in bond rates reflects “the positive news from the US economy”. The analyst also pointed to the US GDP (Gross Domestic Product) growth projection for the 3rd quarter by the Atlanta Fed, which was revised up sharply to +5.8%.
“Now we have to wait for what Jerome Powell, the Federal Reserve Chairman, will say in Jackson Hole at the end of next week and whether he sets the stage for another rate hike by the end of the year.” , added the Convera analyst. “If the data continues to be good, it will open the door wider for further upside.”
On the side, the titles of CVS pharmacies plunged 8.14% while a large insurance company Blue Shield in California broke its partnership for the supply of drugs to turn to Amazon in particular.
Walmart, a member of the Dow Jones, fell 2.24% to $155.69 despite strong results.
The hypermarket chain has revised upwards its forecast for its staggered 2024 financial year in view of the performance achieved in the second quarter, during which its sales increased by 5.7% over one year. The group generated a record net profit of 7.90 billion dollars (+53.3% over one year) on a turnover of 161.63 billion.
Telecommunications systems giant Cisco climbed 3.34% following announcing better-than-expected fourth-quarter results and citing a gain in market share in artificial intelligence-related equipment.
Electricity supplier Hawaiian Electric plunged 15.84% following reports from the Wall Street Journal said the group was in talks with a consulting firm specializing in restructuring as it faces financial and legal challenges. following the deadly fires on Maui Island.
The stock of stock market newcomer VinFast, a Vietnamese electric vehicle maker, which jumped 68% on Tuesday, the day of its IPO, fell back below its IPO level at $20 ( -33.58%).
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