Wall Street remains jittery as bond yield continues to drag the tech stocks to the south. On the other hand, the fears of a potential US debt default weigh around.
On Wednesday, September 29, the US stock market remained jittery after a deep correction on the previous day. However, the Dow Jones Industrial Average (INDEXDJX: .DJI) closed 90 points in the green.
Yesterday, the Dow Jones gained 0.26 to end at 34,390 levels. Similarly, the S&P 500 (INDEXSP: .INX) also ended in the green by 0.16% and closing at 4359 levels. The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) continued to drag down ending 0.24% in the red.
The tech sector has been reeling under the pressure of the rise in bond yields. On Wednesday, the 10-year Treasury Yield was trading below 1.5%. However, it bounced back above 1.54% during the afternoon trading session. The benchmark yield surged as high as 1.56%.
The US stock market struggled to gain the lost ground after Tuesday’s fall. Shares of Apple Inc (NASDAQ: AAPL) surged 0.6% on Wednesday. Similarly, the shares of Netflix Inc (NYSE: NFLX) gained 2.6%. However, stocks like Alphabet Inc (NASDAQ: GOOGL) and Amazon.com Inc (NASDAQ: AMZN) continued with their decline.
At the same time, the utility sector outperformed. However, the energy sector also surged as natural gas prices pulled back sharply. In a note to clients, Lori Calvasina from RBC Capital Markets said:
“Higher bond yields post last week’s more hawkish [Fed], along with higher oil prices, stabilization in high frequency economic indicators, and evidence that the latest Covid surge in the US has peaked, have pressured the Growth trade and bolstered the Value and Small Cap trades – a shift in leadership/ rotation that’s become yet another hurdle for the S&P 500 given the index’s heavy bias towards secular growth. Our bottom line, we think choppy conditions in US equities will persist a while longer.”
Semiconductor Stocks Under Pressure
On Wednesday, semiconductor stocks continued to remain under pressure. Micron gave earnings and revenue outlook for Q1 2022 while missing the consensus estimates. this sent the Micron shares youth by 2%. At the same time, Nvidia Corporation (NASDAQ: NVDA) and Advanced Micro Devices Inc (NASDAQ: AMD) also headed south.
Chipmakers have been facing growing concerns with the supply chain. This has been because of the widespread disruptions caused by the COVID-19 pandemic. Speaking about this matter on Wednesday, Fed Chairman Jerome Powell said:
“It was frustrating to see the bottlenecks and supply chain problems not getting better, in fact at the margins apparently getting a little bit worse. We see that continuing into next year probably, and holding up inflation longer than we had thought.”
One of the major issues the policymakers are facing is raising the debt ceiling. Treasury Secretary Janet Yellen said that failure to raise the debt ceiling by October 18 will cause the US government to run out of cash. This will lead to the first major default by the US government on its debt and can have far-reaching economic consequences.