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The US stock sell-off might have been compounded by the comments that the interest rates may need to be raised to prevent excessive load on the economy.
The US stock market recorded a broad sell-off on Tuesday, as tech stock went on a free fall amid ongoing vaccination efforts to help the economy reopen fully. The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) fell 1.88% to 13,633.50. After losing more than 72.32 points in intraday trading, the Dow Jones Industrial Average (INDEXDJX: .DJI) inked a slight gain of 0.058% or 19.80 points to close at 34,133.03. The S&P 500 (INDEXSP: .INX) slipped 0.67% to 4,164.66.
The US stock sell-off might have been compounded by the comments from Treasury Secretary Janet Yellen, who gave an inclination that the interest rates may need to be raised to prevent excessive load on the economy.
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” she said in taped comments at a virtual event by The Atlantic on Tuesday, as reported by Reuters.
The FAANG stocks trailed the dip as investors weighed in on the impacts of increased interest rate on the market cap growth stocks. Facebook Inc (NASDAQ: FB) closed 1.31% lower to $318.36, and Apple Inc (NASDAQ: AAPL) slipped by 3.54% to close at $127.85. Other firms including e-commerce giant Amazon.com Inc (NASDAQ: AMZN) also recorded notable losses, dropping 2.20% to $3,311.87, and Netflix Inc (NASDAQ: NFLX) veered onto the bearish lane by 1.16% to $503.18. Google’s parent firm, Alphabet Inc (NASDAQ: GOOGL) also inked a 1.55% loss to $2,306.83.
The majority of the gains accrued since the earnings period which dawned with better than expected results are now being parred off by the current sell-off.
Prospects of Sustainable Recovery as US Stock Market Sees Sell-off
The United States stock market and economy, in general, is believed to be the strongest in the world today. Each of the market indices arguably came off with good upticks in the past quarter, and many believe the pull-back may only signify the cushioning of positions by investors.
Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas submitted that “When you’re at all-time highs and the market pulls back, the ones which tend to lead to the downside are often the high-beta stocks such as technology,” as seen in the FAANG stocks.
According to Reuters, while 7 out of the 11 major S&P 500 sectors including Technology plunged low on Tuesday, the Financials, Materials, and Energy sectors, all renowned for their resilience came off with gains. Randy confirmed this when he said;
“When we have pauses or pullbacks people tend to move out of growth stocks into more defensive names.”
The vaccination program is advancing, and while data shows about 40% of the adult population in the US are already inoculated, officials are looking towards attaining herd immunity, a point that can guarantee the complete return of life to normal, and a corresponding run-off on the future resilience of the stock market.