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

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Topline

Technology stocks outperformed the broader market Friday, but stocks closed out a tepid week with slight losses as investors eye Treasury yields that keep moving higher, a sign that stock market gains could eventually come under heightened pressure.

Key Facts

The Dow Jones industrial average was virtually flat Friday, becoming the only major index to post a weekly gain despite climbing just 0.1%, while the S&P 500 and tech-heavy Nasdaq fell 0.2% and 0.3% during the day, pushing weekly losses to 0.7% and 1.6%, respectively.

Heading up gains in the S&P, Deere Inc. shares soared 10% Friday after the agricultural machinery firm shattered expectations with its fourth-quarter earnings report, posting profits that surged 167% year over year (nearly double the figure analysts were expecting) and nabbing a 20% increase in sales, thanks to improving conditions in the farm and construction sectors.

Shares of BioNTech climbed 3% after Pfizer said their two-dose Covid-19 vaccine remains stable in temperatures commonly found in pharmaceutical freezers and refrigerators, as opposed to the ultralow-temperature storage requirements that currently complicate distribution.

After the close Thursday, streaming company Roku reported a nearly 60% surge in revenue—still fueled by a pandemic boom in viewership—and a surprise profit of $65 million; shares, which climbed 3% Friday, are up more than 200% over the past six months.

Meanwhile, Uber shares fell 2% after the United Kingdom Supreme Court ruled that its drivers are entitled to workers’ rights—a decision that will guarantee protections such as minimum wage and will likely have trickle effects for other ride-hailing and delivery services.

Global markets also ticked up Friday, with Shanghai’s SE Composite ending the day up 0.6%, while the United Kingdom’s FTSE 100 edged up 0.1% and Germany’s DAX Index 0.8%.

Key Background

Stimulus expectations, vaccine optimism and booming corporate earnings have pushed the market to new highs since Election Day, but uncertainty wrought by a speculative retail-trading frenzy, rising yields and the threat of various new Covid strains have stunted the market’s growth in recent weeks. Friday’s gains come after Treasury Secretary Janet Yellen on Thursday touted President Joe Biden’s lofty $1.9 trillion stimulus proposal, which is set to be voted on by the House as soon as next week. Meanwhile, Johnson & Johnson’s vaccine is expected to obtain its emergency-use authorization within a few days as well, meaning inoculation could be set to surge throughout March and April. 

Crucial Quote 

“The market is painting a picture of optimism: strong growth, and rising—but not troublesome—inflation,” Bank of America economist Michelle Mayor said Friday. “We agree, but there is a delicate balance: Strong growth could prompt a faster rise in rates, driving up borrowing costs and weighing on risky assets, limiting upside to economic growth.”

Tangent

Yields on the ten-year Treasury—a bellwether of investor sentiment in equity markets that moves inversely with stocks—jumped 40 basis points on Friday, reaching their highest levels in a year.

Surprising Fact

Tacking on to recent gains, bitcoin surged past a $1 trillion market capitalization on Friday for the first time ever amid an influx of institutional investments.

Further Reading

GameStop Hearing On Market Manipulation (Forbes)

Dow Falls 200 Points After Disappointing Walmart Earnings And Worse-Than-Feared Jobless Data (Forbes)

Is The Stock Market About To Crash? (Forbes)

New Unemployment Claims Hit 861,000 Last Week—Worse Than Economists Expected (Forbes)

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