Dow Flat But Big Tech Continues To Struggle While Energy Stocks Add To Gains

Topline

The booming technology trade that has lifted stocks to new highs during the pandemic continues to unravel Wednesday as inflation concerns rattle the market despite a strong resurgence among hard-hit energy firms.

Key Facts

Shortly after the market open, the Dow Jones industrial average ticked down 60 points, or 0.2%, while the S&P 500, which broke a five-day losing streak on Tuesday, and the tech-heavy Nasdaq fell 0.3% and 0.5%, respectively.

Energy firms continued to head up market gains Wednesday, with Cabot Oil & Gas Corp and Entergy climbing 6% and 2%, respectively; the S&P 500 Energy Index has soared 27% this year–more than double the return of any other sector over the same period.

Technology stocks, on the other hand, continued to slip: Apple, Amazon and Alphabet all fell about 1% Wednesday morning.

Elsewhere in the market, Tesla rival Fisker Inc. is soaring nearly 20%, nearly hitting a record high from November, after announcing a collaboration with Taiwanese manufacturer Foxconn on a new electric vehicle project.

Shares of payments fintech Square, meanwhile, are sinking about 5% after the firm disclosed in a better-than-expected fourth-quarter earnings report that it has doubled-down on a $50 million bitcoin investment from October, purchasing $170 million more of the world’s largest cryptocurrency since.

Yields on the 10-year Treasury–which moves inversely to stocks–rose 50 basis points Wednesday to 1.4%, tacking on to their highest level since last February following congressional testimony from Federal Reserve Chair Jerome Powell, who insisted Tuesday that monetary policy would remain accommodative despite inflationary concerns.

Crucial Quote 

“We’re going through a very choppy period in the markets, with investors uncertain how to read the movements we’re seeing in bond markets,” Oanda Senior Market Analyst Craig Erlam said Wednesday morning. “The curve is steepening and investors are fretting a little about the prospect of higher inflation. Policymakers are doing their best to alleviate these fears but there appears to be a growing consensus that we will see more inflation this year as a result of the turbo-charged recovery everyone is anticipating.”

What To Watch For

Erlam says the big question around inflation is how temporary any spike may be, and whether lawmakers respond to it. He expects they may have a more relaxed approach to inflation than in the past. This may make for a jumpy year in the markets, with any signs of inflation seeing jitters quickly return and any rallies to stall, just as we’re experiencing at the moment,” he notes.

Surprising Fact

Publicly traded MicroStrategy, one of the largest corporate bitcoin investors, said Wednesday morning it spent approximately $1 billion to acquire 19,452 more bitcoin tokens. The firm purchased while prices were down nearly 10% from a record high of $58,000 earlier this week. Bitcoin is currently trading at about $49,500. 

Tangent

Global markets also slipped Wednesday. Japan’s Nikkei 225 and Shanghai’s SE Composite fell roughly 2% each, while the United Kingdom’s FTSE 100 is down 0.2%.

Further Reading

Stocks End Week In Red As Treasury Yields Surge To One-Year Highs (Forbes)

Is The Stock Market About To Crash? (Forbes)

Tesla Has Plunged 25% And Lost $200 Billion In Market Value Since Its Bitcoin Investment (Forbes)

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