Wall Street ended lower at the beginning of a holiday-shortened week on Tuesday, as rising U.S. Treasury yields pressured interest rate sensitive megacap shares.
Growth stocks dragged the tech-laden Nasdaq down the most. The S&P 500 joined the Nasdaq in negative territory, while value stocks helped the Dow hold on to nominal gains.
“Higher [Treasury] yields are pressuring growth stocks, and on the other hand industrials, utilities and energy are outperforming,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “Money’s flowing out of the growth areas and working its way to the value side of things, which is a microcosm of what we’ve seen all year.”
“It’s important to remember that there are other groups that can take up the baton when the high-flyers come back to earth,” Mr. Detrick added.
Shares of Tesla Inc. tumbled 11.4 per cent, and the electric car maker was the heaviest drag on the S&P and the Nasdaq after a review by Reuters of an internal schedule revealed the company plans to scale back production at its Shanghai plant.
With Tuesday’s move, Tesla stock has lost 69 per cent of its value this year.
Rising Treasury yields put interest rate sensitive growth stocks under pressure, a recurring theme in 2022. For the year, growth shares have plunged over 30 per cent compared with value’s slide of about 7.5 per cent over the same period.
With just three trading days remaining in 2022, all three indexes are on course to post their biggest annual loss since 2008, the nadir of the global financial crisis.
“It was a bad year for stocks, but a worse year for bonds. That’s extremely rare,” Mr. Detrick said. “It’s an unfortunate reminder that the markets can sometimes surprise.”
Beijing eased its strict COVID-19 curbs, which have battered the US$17-trillion economy, fueling hopes of a revival in global demand and an improving supply chain.
On the economic front, the Commerce Department’s initial take on the U.S. goods trade balance showed the deficit narrowing by 15.6 per cent, while S&P Case-Shiller showed home price growth in its 20-city composite cooled to 8.6 per cent year-on-year, the lowest reading since November, 2020.
The Dow Jones Industrial Average rose 37.63 points, or 0.11 per cent, to 33,241.56, the S&P 500 lost 15.57 points, or 0.40 per cent, to 3,829.25 and the Nasdaq Composite dropped 144.64 points, or 1.38 per cent, to 10,353.23.
Of the 11 major sectors in the S&P 500, six ended the session red, with consumer discretionary and communication services suffering the steepest percentage loss.
U.S.-listed shares of Chinese firms including JD.Com Inc., Alibaba Group Holding Ltd. and Pinduoduo Inc. jumped between 1.4 per cent and 4.9 per cent after Beijing announced it was relaxing travel restrictions.
Southwest Airlines Co. tumbled after harsh weather forced the discount commercial carrier to lead its peers in cancellations. The broader S&P 1500 Airlines index also ended the session in the red.
Declining issues outnumbered advancing ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.93-to-1 ratio favored decliners.
The S&P 500 posted nine new 52-week highs and three new lows; the Nasdaq Composite recorded 96 new highs and 448 new lows.
Volume on U.S. exchanges was US8.35-billion shares, compared with the US11.35-billion average for the full session over the last 20 trading days.