By Yasin Ebrahim
Investing.com – The Dow turned negative after hitting record intraday highs Thursday, paced by a slump in energy and tech, with the latter roiled by a swing higher in bond yields that has placed growth stocks in the crosshairs once again.
The Dow Jones Industrial Average fell 0.15%, or 50 points, after hitting a record of 33,227.78. The S&P 500 fell 0.30%, while the Nasdaq Composite was 2.44%
The U.S. 10-year yield topped 1.7% a day after the Federal Reserve tripled down on dovish monetary policy guidance, by raising growth and inflation forecast but keeping its lower for longer outlook on rates intact.
"Our takeaway from the March FOMC meeting was that policymakers did not just 'double-down' on dovish guidance, they 'tripled-down,'" Morgan Stanley (NYSE:MS) said in a note. The Fed shrugged off concern about the uptick in higher longer-term rates … and said "it's still too early to talk about tapering, leaving the risks to the timing of tapering and to rate hikes skewed toward later rather than sooner relative to our expectations."
The sharp rise in bond yields triggered a sea of red in tech stocks as their valuations remain unattractive when compared with other corners the market like cyclicals that were left behind during pandemic, but are now riding the wave of reflation higher.
Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN) and Google-parent Alphabet (NASDAQ:GOOGL), which together make up a quarter of the S&P 500, were lower.
Chip stocks (NASDAQ:SOXX) also added fuel to the fire, falling 3%, with Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD) and Qualcomm (NASDAQ:QCOM) nursing losses.
Beyond tech, energy was a drag on the market, paced by slump in oil prices as investors fear major oil producers could soon turn on the pump to take advantage of lofty oil prices.
"We expect economic growth and oil demand to provide resilient and OPEC+- to ease their production restraint in the coming months. These extra barrels will likely be an oil price headwind as the year progresses," Wells Fargo said in a note.
Other value stocks like financials – led by banks – continued to accelerate.
"[C]urrent directional correlations are likely to remain intact on a near- to-intermediate-term basis- which implies that investors are likely to see positive relative performance trends out of areas like small-caps, value stocks, and the banks / financials sector as the TNX (10-year interest rate) rallies and the economy continues to reflate its way out of recession," Janney Montgomery Scott.