Markets Now Down
The S&P 500 is up on Thursday, and so is the Dow Jones Industrial Average. With 336 stocks in the S&P 500 higher, it’s fair to say the average stock is doing well too. The Nasdaq Composite is the exception.
The Nasdaq has dropped 0.3%, even as the Dow Jones Industrial Average has risen 90.81 points, or 0.3%, and the S&P 500 has advanced 0.2%.
Here are three reasons the Nasdaq is having a tough day:
Blame it on bond yields. On Thursday, the 10-year Treasury yield rose as high as 1.68%, from 1.62% at Wednesday’s close. That’s partly because the U.S. economy is growing fast—GDP rose an annualized 6.4% during the first quarter of 2021—and because inflation appears to be running hotter as well. Several companies flagged rising material costs in their recent earnings reports, including Caterpillar (CAT), which said that it can raise prices as the cost of its inputs go higher.
Growth stocks are getting hit.Higher inflation, if it turns out to not be “transitory,” would be particularly bad for growth stocks with high valuations, many of which reside in the Nasdaq Composite. And it’s the decline in growth stocks that’s been the difference between gains for the S&P 500 and a loss in the Nasdaq. The Vanguard S&P 500 Growth exchange-traded fund (VOOG), for instance, has fallen 0.2%, while the ARK Innovation ETF (ARKK), home to particularly expensive growth companies fell 3.2%. Its largest holding is Tesla (TSLA), which has dropped fell 3.4%. It seems investors aren’t waiting around to find out.
Apple’s slide. Apple (AAPL), with a more than $2 trillion market capitalization, is the biggest stock in the S&P 500, at 6% of the benchmark. It’s an even bigger part of the Nasdaq, making up one-tenth of the tech-heavy index. The stock initially rose 2.6% after Apple reported fantastic earnings, but those gains quickly disappeared after it hit $137.07, a level it’s hit several times since September and has only surpassed it once. It may serve as resistance now. If Apple can’t break out, the Nasdaq will have a tougher time.
Write to Jacob Sonenshine at [email protected]
