Stock market today: Dow holds its own amid surging bond yields and bitcoin crackdown in China

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The stock market turned around this week after experiencing the worst Monday in months, as concerns about the China Evergrande group faded and the Federal Reserve gave no indication it would cut economic support further. quickly than expected. The market was fairly quiet on Friday.

The S&P 500 was up 3.4% from its Monday low, the worst point of the indexes’ larger pullback. On Monday, the S&P 500 recorded its biggest drop in points and percentage points since May 12. Shares began to rebound as the Chinese government pumped around $ 30 billion into its banking system, allaying fears that Evergrandes’ problems spill over to the global economy. And while the Federal Reserve has made it clear that it will be scaling back its bond buying program soon, markets expect the Fed to do so at a moderate pace, not a rapid one.

The S&P 500 ended this week with a gain of 0.5% and is currently above its 50-day moving average, a key technical indicator.

As for Friday, today is a reset day after everything we’ve been through this week, said JJ Kinahan, Chief Markets Strategist at TD Ameritrade. There has been so much news in such a short time that people are hitting the reset button and saying let’s see what happens this weekend and don’t expose ourselves if we don’t have to. ”

Yields on US Treasury bonds have surged as global demand appears to be declining for the time being. Global bond investors often pile up in higher yielding US debt when global yields remain low, driving up the price of US debt and lowering yields. This trade has been reversed lately.

The 10-year bond yield climbed to 1.46% on Friday, its highest since July, but remains well below the 1.75% peak in March 2021. The yield was hovering around 1.32% earlier this week. week. This comes after the UK 10-year gilt yield rose to 0.84%, after hovering around 0.7% earlier in the week. The rise makes US debt slightly less attractive and was boosted by the Bank of England’s hint that it could raise interest rates as early as the first quarter of 2022.

The hawkish Bank of England meeting was the catalyst for higher yields and we know that because 10-year GILT yields jumped and pulled Treasury yields higher, writes Tom Essaye, founder of Sevens Report Research.

The surge in long-term bond yields has dramatically reduced the valuations of growing companies, as these companies are valued on a relatively long basis. While the tech-rich Nasdaq hasn’t budged much, it is down half a percentage point at one point in the day. The Russell 2000 Growth Index fell 0.5%.

As rates have gone up, people have sold growth and value, Kinahan said.

Nonetheless, the decline in growth stocks was fairly minor. It’s not like an incredibly bad decision where it’s about such a worrying little wallet adjustment, rather than determined people freaking out about it, Kinahan said.

While the movements of the major indices were nothing out of the ordinary, the stock market was a bit stronger than it looked as many sectors registered gains. Equal-weighted exchange-traded fund (RSP) S&P 500 Invesco, which reflects the size of stocks up or down, gained 0.2%.

Elsewhere, China gained attention again on Friday, and not just for the China Evergrande drama. Regulators across the country have issued a statement saying cryptocurrency transactions are illegal and should be banned.

The price of Bitcoin has fallen almost 6%, to around $ 42,000. Ethereum and Litecoin sold around 6% and 7.5%, respectively.

As for China Evergrande (3333.HK), the stock fell 11.6% in Hong Kong, as reports said the company did not make an interest payment of $ 83 million on a bond. offshore denominated in dollars.

Fortunately for global stock investors, the Chinese government is sensitive to the need to avoid broader financial risks and would not allow Evergrande’s situation to turn into a Lehman-like scenario, writes Seema chief strategist for Principal. Global Investors.

Shares of Evergrande electric vehicle company, Evergrande New Energy Auto (0708.HK), fell 23.4% amid reports it had fallen behind in payments to workers and suppliers.

Overseas, the Tokyos Nikkei 225 rose 2.1% as Japanese traders returned from vacation and hailed the bullish inflation data. Germany’s DAX fell 0.7% as the country heads to a federal election this weekend that will replace longtime Chancellor Angela Merkel.

Here are seven stocks in motion on Friday:

Nike (NKE) fell 6.3% after its profits exceeded estimates, but sales fell short of targets. Nike also cut its forecast, citing supply chain issues. Cowen analysts noted that the company had cut its sales forecast for fiscal 2022 by $ 3.3 billion due to supply chain constraints. The company now expects year-over-year sales growth in the average percentage figures, down from an earlier low-to-double-digit forecast and Cowen has reduced its price target to 180 $ against $ 196.

Cloudflare (NET) fell 3.9% after being slashed to Perform from Outperform to Oppenheimer.

Roku (ROKU) is down 3.8% after being demoted to equal weight versus overweight at Wells Fargo. The action was upped to Buy From Neutral at Guggenheim on Thursday.

Coinbase (COIN) lost 2.4% after China said all crypto transactions would be illegal.

Micron Technology (MU) was little changed after JPMorgan lowered its price target from $ 140 to $ 100.

AstraZeneca (AZN) rose 1.5% after positive results from a phase three trial for cancer treatment developed with Merck (MRK), which rose 1%.

Write to Nicholas Jasinski [email protected]

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