Nasdaq Plunges To Nearly Two-Month Closing Low As Bond Yields Rebound

Stocks moved mostly lower over the course of the trading day on Wednesday, extending the pullback seen in the previous session. The tech-heavy Nasdaq showed another particularly steep drop, tumbling to its lowest closing level in nearly two months.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Nasdaq plunged 361.04 points or 2.7 percent to 12,997.75, the S&P 500 slumped 50.57 points or 1.3 percent to 3,819.72 and the Dow fell 121.43 points or 0.4 percent to 31,270.09.

The continued weakness on Wall Street came as bond yields showed a notable rebound after trending lower over the past few sessions.

Yields remain well off the highs set last week, but renewed concerns about the outlook for interest rates and inflation weighed on highly-flying tech stocks.

The rebound by yields came amid optimism about the coronavirus vaccine rollouts, which had also contributed to an advance by stocks futures before the bond markets opened.

President Joe Biden announced Tuesday the U.S. will have enough vaccine supply for every adult in America by the end of May.

Biden cited the emergency use authorization issued for Johnson & Johnson’s (JNJ) vaccine as well as a collaboration between J&J and Merck (MRK) to expand production of the single-dose vaccine.

On the U.S. economic front, payroll processor ADP released a report showing much weaker than expected private sector job growth in the month of February.

ADP said private sector employment rose by 117,000 jobs in February after climbing by an upwardly revised 195,000 jobs in January.

Economists had expected employment to increase by 177,000 jobs compared to the addition of 174,000 jobs originally reported for the previous month.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

The Institute for Supply Management also released a report showing a slowdown in the pace of growth in U.S. service sector activity in the month of February

The ISM said its services PMI dropped to 55.3 in February from 58.7 in January, although a reading above 50 still indicates growth in the sector. Economists had expected the index to come in unchanged.

The pullback by the services PMI came after the index reached its highest level since hitting 58.8 in February of 2019.

Sector News

Reflecting weakness in the broader tech sector, software stocks showed a substantial move to the downside on the day. The Dow Jones U.S. Software Index plunged by 3.3 percent to its lowest closing level in well over a month.

Biotechnology, semiconductor and networking stocks also saw significant weakness, contributing to the steep drop by the Nasdaq.

Considerable weakness also emerged among retail stocks, as reflected by the 2.4 percent slump by the Dow Jones U.S. Retail Index. The index tumbled to a nearly four-month closing low.

Gold, healthcare and housing stocks also saw notable weakness on the day, while oil, airline and banking stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.5 percent, while China’s Shanghai Composite Index surged up by 2 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index advanced by 0.9 percent, the French CAC 40 Index and the German DAX Index rose by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries gave back ground after trending higher over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced 5.5 basis points to 1.470 percent.

Looking Ahead

A report on weekly jobless claims may attract attention on Thursday, although trading activity is likely to be somewhat subdued ahead of the release of the monthly jobs report on Friday.

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