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S&P 500 Dips, Nasdaq Ekes Out Record; Hawkish Fed Talk Continues

Stock MarketsJun 23, 2021 21:20
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By Yasin Ebrahim – The S&P 500 closed lower, while the Nasdaq notched a record high Wednesday even as tech struggled to replicate its prior-day rally amid an uptick in U.S. bond yields.  

The Nasdaq Composite closed up 0.27% at a closing high of 14,271.7, the S&P 500 fell 0.12%, and the Dow Jones Industrial Average slipped 0.21%, or 71 points.

Technology stocks, which had a strong session Tuesday, gave up some gains as a slight rise in U.S. bond yields amid hawkish talk from Federal Reserve officials propped up  U.S. bond yields.   

Microsoft (NASDAQ:MSFT, Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL) closed lower, while (NASDAQ:AMZN) was ended just above the flatline.

Atlanta Fed President Raphael Bostic confirmed he was one of the seven Federal Open Market Committee members who projected a rate hike in late 2022 reflecting the June summary of economic projections released last week.

Bostic said the economy is close to meeting the Fed's "substantial further progress" hurdle to start bond tapering.

The recent bid in tech has been helped by investor bets that a low growth, stable inflation environment is on the horizon. But some warn it is too early to give up on the reflation rate, which tends to benefit economically cyclical corners of the market, as rates are likely to resume their upward projection.

"[W]e believe the U.S. is most likely still within the early-to-mid-stages of a reflationary recovery cycle that can transition toward inflationary growth in the years ahead," said Mark Luschini, chief investment strategy at Janney Montgomery Scott.

"[T]his reversion back toward low-rate/low-growth can persist over the near-term, [but] rates will eventually resume their modest upward trajectory … this can allow for further multiple expansion in stocks," it added.

Energy led the move higher propped up by rising oil prices as data showed weekly U.S. oil fell sharply for a fifth straight week, reflecting strong demand over the summer months.

Crude oil inventories fell 7.6 million barrels last week, compared with analysts' expectations for a draw of 3.9 million barrels.

The advance in U.S. rates helped financials, mostly banking stocks, which tend to benefit from rising rate environments amid a boost to net interest margin.

In vaccine news, the Centers for Disease Control and Prevention said there was a "likely association" between heart inflammation and mRNA vaccines in teenagers and young adults. Both Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) fell, with the latter down 4%. 

On the economic front, the frantic pace of housing activity appears to be cooling, constrained by supply issues as new-home sales fell by 5.9% to a 769,000 units in May on an annualized basis.

Bitcoin rebounded from its slump below $30,000 a day earlier, helping crypto-related stocks including Coinbase Global (NASDAQ:COIN), Marathon Digital (NASDAQ:MARA), and Riot Blockchain (NASDAQ:RIOT) end the day higher. 

S&P 500 Dips, Nasdaq Ekes Out Record; Hawkish Fed Talk Continues

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