The Dow Jones rose by more than 450 points on Wednesday, thereby reaching a new all-time high.
To put it more precisely, the index increased by 1.5% (464.28 points) and hit 32,297.02 points. Meanwhile, the S&P 500 gained 0.6% and reached 3,898.81 points, while the Nasdaq Composite grew by 0.1% and closed at 13,068.83 points.
Recently, the US stock market has been subject to chaos and uncertainty, so investors are closely watching the uncontrolled behavior of US bond yields.
This is because an increase in this indicator reduces the difference between relative valuations of more reliable bonds and risky securities.
Experts emphasize that since the beginning of the COVID-19 pandemic, a lot of economic data has not been taken into account by the market. Instead, the US exchanges have chosen a benchmark for a speedy economic recovery. But in the very near future, investors will have to face inevitable facts and pay close attention to signs of inflation and changes in monetary policy.
Fortunately, until this moment, inflation is still low, having grown by only 0.4% this February. Such significantly reduces the fears of investors that the US Federal Reserve will tighten monetary policy earlier than expected.
And, on Wednesday, the yield on 10-year US Treasuries dipped to 1.520%. At the beginning of this year, its figure was 0.915%. The sharp rise in yields over the past two months of 2021 demonstrates expectations that the Fed will increase short-term interest rates.
The obvious improvement in the economic outlook significantly increases the demand for banking and oil and gas sectors. At the same time, interest in securities of companies in the technology sector, which in 2020 benefited from the introduction of quarantine measures, is constantly decreasing. This state of affairs significantly supports the DJIA, thereby pushing it past the S&P 500 this 2021.
Therefore, today, the US stock market is experiencing an active transition from growth stocks to value stocks. Sectors that were considered lagging until recently are now gradually moving forward.
The growth leaders were oil and gas, financial and materials sectors, which increased by 2.6%, 1.9% and 1.6%, respectively. Meanwhile, the technology sub-index sank by 0.4%.
To put this more precisely, Tesla rose by 0.8%, while Amazon and Apply dipped by 0.2% and 0.9%, respectively. General Electric also sank by 5.4% on news that the corporation will merge its aviation leasing business with AerCap and close down its GE Capital division. As for GameStop, it surged by 7.3%.
Fed officials have repeatedly said they would allow inflation to exceed 2% for some time before tightening the monetary policy. However, analysts say such an event will take longer than expected, especially since inflation is still limited amid relatively low demand in many sectors.
As for other stock indices, Stoxx Europe 600 gained 0.4%, after Adidas reported more than 4% increase in its stocks amid better-than-expected sales.
The Hang Seng index also increased by 0.5%, the Nikkei 225 grew by 0.1%, while the Shanghai Composite slipped by 0.1%.
