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Rising bond yields continue to pressure on tech stocks with Nasdaq Composite correcting another 2%. On the other hand, energy stocks gained momentum amid optimism of economic reopening.
Trading for this week started on a negative at Wall Street on Monday, October 4, with a new stage of correction. The Dow Jones Industrial Average (INDEXDJX: .DJI) tanked by 323 points ending the day at 30,004 levels. Similarly, the S&P 500 (INDEXSP: .INX) shed 1.3% ending the trading session at 4,300 levels.
On the other hand, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) corrected more than 2% amid the rout in the technology stocks. For the last few weeks, investors have been pulling money out of tech stocks due to the rising bond yields.
Some of the top tech companies like Apple Inc (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Nvidia Corporation (NASDAQ: NVDA) headed lower. The 10-year Treasury Yield inched slightly higher on Monday at 1.48%. Last week, the Treasury Yield touched a high of 1.56% amid concerns of tighter monetary policy and inflationary pressure.
The stock of social media giant Facebook Inc (NASDAQ: FB) tanked 4.9% after a whistleblower accused the company of “betrayal of democracy”. Frances Haugen, a former product manager on Facebook’s civic misinformation team leaked documents wherein she stated that Facebook executives were aware of the negative impacts of its platform on young users.
“I’ve seen a bunch of social networks and it was substantially worse at Facebook than anything I’d seen before,” said Haugen.
On the other hand, Facebook, Instagram, and Whatsapp faced one of the biggest outages recently on Monday morning. This could also be one of the reasons putting the FB stock under pressure.
Tesla Inc (NASDAQ: TSLA) was an exception gaining 0.8% during Monday’s trading. This happened as the automobile giant said that it has delivered 241,000 electric vehicles during Q3 2021. This was way above the analysts’ estimates.
Stocks Linked to Economic Reopening Gained amid Wall Street Correction
After gaining 8% last Friday, Merck (NYSE: MRK) shares gained another 2% on Monday. The pharmaceutical giant said that it has developed an oral antiviral treatment with Ridgeback Biotherapeutics for Covid-19. This reduces the risk of hospitalization and death by 50% among patients having mild to moderate cases.
“The financial markets are adjusting leadership to reflect another Covid-induced reopening cycle. That is, commodities are rising, bond yields are rising, cyclical sectors and small cap stocks are outpacing, and technology and growth stocks in general are underperforming.”
Energy stocks were also up after a surge in oil prices. ConocoPhillips gained 2% while ExxonMobil Corporation (NYSE: XOM) was up by 1.3%. Mark Yusko, Morgan Creek Capital Management CEO and chief investment officer said:
“At these extremely lofty valuations stock prices are very sensitive to modest changes in incremental capital flows and it appears that there is some ‘performance chasing’ going on as the energy space is attracting capital which is trying to make it look like they had exposure to oil & gas (window dressing) and that means less money flowing into tech”.