Nasdaq Sinks to Two-Month Low as Bond Yields Jump: Markets Wrap

(Bloomberg) -- The renewed bout of Treasury volatility spurred a surge in bond yields on Wednesday, dragging down stocks as investors grappled with concern over stretched valuations.

A selloff in high-flying giants such as Apple Inc. and Inc. outweighed gains in banks and energy producers. The Nasdaq 100 slumped to a two-month low, bringing its losses from a February peak to about 8%. The S&P 500 extended its slide into a second day, while the Dow Jones Industrial Average outperformed. Benchmark U.S. government yields approached 1.5%, with bonds pricing in the highest five-year inflation expectations since 2008. Traders also assessed data pointing to a slow and uneven economic recovery from the depths of the pandemic.

The rout in Treasuries has rattled nerves across the globe amid warnings of excessive optimism among equity investors after the S&P 500 surged 70% in 11 months, notching the best start for a bull market in nine decades. While there haven’t been any signs of panic, concerns over lofty valuations have emerged. The stock benchmark’s earnings yield was about 1.7 percentage points above 10-year rates: the smallest advantage in three years.

“Volatility has picked up a little bit, we’ve had bigger up days and down days,” said James Ragan, director of wealth management research at D.A. Davidson. “The focus is still on rising interest rates and how that’s impacting valuations on some of the higher multiple sectors.”

Data Wednesday showed that growth at U.S. service providers slowed to a nine-month low in February, when severe winter weather gripped much of the nation and limited activity. Meanwhile, the number of employees at U.S. businesses rose by less than expected, underscoring the jobs market’s struggle to recover despite a decline in Covid-19 infections in recent weeks.