Market Coverage: Wednesday January 5 Yahoo Finance
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U.S. stocks fell on Wednesday as technology shares extended declines from the prior trading day.
The S&P 500 drifted lower to pull back further from Tuesday's record intraday high. The Nasdaq also dropped and underperformed the other two major equity indexes. Apple (AAPL) shares steadied following a decline a day earlier earlier, which pulled the stock back after reaching a $3 trillion market capitalization for the first time ever at the start of the week.
Investors Wednesday morning also digested fresh upbeat economic data, as private payroll gains handily exceeded estimates for December. ADP said Wednesday that private sector employers added back 807,000 jobs during the final month of November, nearly doubling expectations as job growth picked up to help alleviate some labor shortages.
In the first few trading days of the new year, investors have piled into cyclical areas of the market, with shares of companies seen as the biggest beneficiaries of a firming economic recovery and rising interest rates outperforming. The energy, financials and industrials sectors outperformed in the S&P 500 on Tuesday, and the Dow Jones Industrial Average composed heavily of cyclical stocks rose by more than 200 points to set an all-time closing high.
Treasury yields steadied after moving sharply higher on Monday and Tuesday, which had added pressure to technology and growth stocks valued heavily on future earnings potential. The benchmark 10-year yield jumped further above 1.6% to reach its highest level since November, albeit while remaining low on a historical basis.
"[Yields are] moving sharply higher today or in the very recent past, but they've been stubbornly lower when you compare them to what the inflationary talk has been," Scott Kimball, Co-Head of U.S. Fixed Income for BMO Global Asset Management, told Yahoo Finance Live on Tuesday. "There's been lots of discussion about runaway inflation, the Fed being behind the curve. All of that would translate into a long-end — the 10, 20, 30-year portion of the yield curve — that's a lot steeper, or materially higher even in absolute terms than it is right now."
Meanwhile Eddie Ghabour, Eddie Ghabour, founder of KeyAdvisors Group and author of "Common Sense Bull," told Yahoo Finance he expected the move higher in rates so far this week would ultimately prove to be a "head fake."
"This increase in rates doesn't concern me at all. I think it's going to be short-lived," he said. "The bigger concern I have right now is the fact that a lot of investors are still carrying a tremendous amount of risk heading into a year that's going to be unprecedented when the Fed is tightening during a slowdown. It usually is not a good recipe for high-risk assets.
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