At the close of trading on Wednesday, stocks in the technology sector sharply collapsed amid the growing yields on US government bonds.
It can be noted that the US stock market has an unstable state in recent years: the main stock indicators are constantly balancing between growth and decline. At the same time, market participants are worried that the aid package for the economy will trigger inflation to extremely rise. The forecasts that the US Fed will start raising interest rates in the long term serve as confirmation of investors' concerns.
Today, the US stock exchanges were overwhelmed by serious nervousness amid the prospect of higher interest rates. So, investors returned to a situation where value is a priority and not growth.
In particular, the NASDAQ Composite index plunged by 2.7%, that is, to 12,997.75 points. In fact, this indicator has already declined by 7.8% from the maximum level on February 12. At the same time, the S&P 500 indicator also fell by 1.3%, namely to 3,819.72 points and lastly, we have the Dow Jones Industrial Average, which lost 0.4%, falling to 31,270.09 points.
Meanwhile, the 10-year Treasury yield surged from 1.413% to 1.469%, but failed to reach the previous Thursday's high of 1.513%.
The US Central Bank representatives noted that the increase in yields indicates confidence about the prospects for the economy. In the short term, the Fed plans to maintain a soft policy to support the economy.
An additional positive factor for the stock markets was the hints that the US Democratic Party is preparing to agree on a package of state support measures in the amount of $ 1.9 trillion in the near future. In addition, the final settlement of disputes over unemployment benefits and other support measures is expected.
Meanwhile, US President Joe Biden said that the government will have enough COVID-19 vaccines to vaccinate the entire adult population of the States by the end of spring. Earlier, he announced that this will happen two months later.
Thus, the vaccination process is going rapidly than experts predicted, so market participants gained hope that the economy will be able to recover on its own. Despite this, the government continues to prepare a package of state aid measures. In this case, many analysts are starting to revise their forecasts upward for the growth rate of the US economy.
According to them, the hope for an optimistic economic outlook is driving the growth of demand for securities of companies that are largely dependent on the return of the economy to a pre-crisis mode. These are shares of the banking and oil and gas sectors, which outperform the securities of companies in the technology sector this year.
As for US domestic statistics, the Institute for Supply Management (ISM) published a report yesterday about the US non-manufacturing sector for February. According to the ISM, the activity in the sector has been continuously rising for nine months.
The US Federal Reserve's economic survey showed that the country's economy only slightly grew at the beginning of 2021, but industries such as leisure, tourism and hotel businesses were still experiencing problems due to the current quarantine restrictions.
The pan-European STOXX Europe 600 index rose by 0.1%. The leading Asian indexes also recorded solid gains on Wednesday. Here, China's Shanghai Composite surged by 2%, Hong Kong's Hang Seng by 2.7%, Japan's Nikkei 225 also rose by 0.5%, and South Korea's KOSPI by 1.3%.
