Wall Street ends in disarray, lower rates benefit tech sector

(New York) The New York Stock Exchange ended Tuesday in scattered order, a possible recession scenario sending many stocks reeling while the technology sector benefited from a fall in bond yields.

Posted at 9:37
Updated at 4:13 p.m

The Dow Jones fell 0.42% to 30,967.82, the tech-heavy NASDAQ index gained 1.75% to 11,322.24 and the broader S&P 500 index fell 0.16% to 3831.39 .

The session had started in the red after three days of a long bank holiday weekend in the United States (National Day), reflecting the tone of European stock markets.

But as the day progressed, indices rallied, particularly the NASDAQ.

“Buyers came back” during the session, analysts from Briefing.com noted in a note, “when they appeared to be on vacation. »

The other driver of this reversal was the escapade of technology and growth stocks, which benefited from the easing of bond rates. The 10-year government bond yield fell sharply to 2.83% from 2.88% on Friday.

“One of the most well-documented correlations is that when interest rates fall, the NASDAQ receives support,” said Quincy Krosby of LPL Financial.

The fall in interest rates reflects expectations of less hawkish monetary policy than expected, which would anticipate less tight credit conditions in the coming years, a key factor for so-called growth stocks, which need to borrow to fund their development.

PayPal (+4.20%), Airbnb (+4.96%) and Uber (+5.53%) stuck their noses out the window, as did almost all of the valuation giants associated with the technology sector, Amazon (+3, 60%). to Alphabet (+4.41%), to Meta (+5.10%).

“You’re looking for growth (in the stock market) where you can find it,” Quincy Krosby argued, “and many of these stocks have been hit so badly by the market that they’re attractive today.” »

The operation ended up falling into a bargain hunt that lifted Tesla (+2.55% to $699.20), which just released disappointing earnings results on Saturday.

Ironically, in a New York square that is becoming more and more convinced of the recession hypothesis, the so-called defensive values, i.e. less sensitive to the economy, were not able to assert themselves on Tuesday.

Cable operator Comcast (-0.47%), grocery giant Kraft Heinz (-1.35%) and Procter & Gamble (-0.97%) all ended in the red.

Another troubled sector, energy, suffered from the collapse in oil and commodity prices in general.

The oil companies Marathon Oil (-6.30%) and ConocoPhillips (-6.97%), but also the steel manufacturer US Steel (-4.97%), the mining company Freeport McMoRan (-6.64%) and the in-house commodities broker Archer-Daniels-Midland (-5.27%) all bit the dust.

The fall in interest rates undermined the financial sector as the prospect of less stringent Federal Reserve (Fed) tightening would strip banks of some of their margins without preventing a credit crunch.

Citigroup (-0.55%) and Bank of America (-1.01%) therefore lost ground on Tuesday.

In this bleak context, anything fueling the scenario of a sharp economic slowdown or even a recession can act as a catalyst for equity markets by staving off the threat of an overly stubborn Fed.

In the case of the US jobs report, the week’s most anticipated macroeconomic indicator, due out on Friday, Quincy Krosby said “bad news can become good news.” “Lower job creation and a slowdown in wage growth would be seen as positive for the market. »

However, fears of recession continue to dominate the New York market, whose mood has been very changeable for several weeks. For now, “Wall Street remains a brokerage market,” says the analyst, who is at the mercy of headlines or technical moves.

The Toronto Stock Exchange closes almost 200 points down

The Toronto Stock Exchange closed down nearly 200 points Tuesday as crude oil prices fell and losses in the energy and base metals sectors deepened.

The Toronto Floor’s S&P/TSX Composite Index lost 194.70 points to end the session at 18,834.16 points.

On the foreign exchange market, the Canadian dollar traded at an average rate of 76.70 US cents, after 77.72 US cents the previous day.

The Canadian Press

Leave a Comment