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S&P 500 Set to Snap Four-week Win Streak as Growth Stocks Slide

By:
Joel Frank
Published: Aug 19, 2022, 17:50 UTC

Traders cited rising bond yields as hurting sentiment, with the S&P 500 dipping 1.0% on Friday.

Wall Street

In this article:

Key Points

  • Big tech/growth stocks led a sell-off in US equity markets on Friday, weighed by rising US bond yields.
  • The S&P 500 fell 1.2% and the Nasdaq 100 2.0%, with both on course to snap four-week win streaks.
  • Bed Bath & Beyond slid 40% after billionaire investor Ryan Cohen dumped shares for a $60 million profit.

Big Tech/Growth Stocks Lead Friday Sell-off

US equity markets were led lower on Friday by a decline in big tech/growth stocks, with the likes of Apple (-1.3%), Microsoft (-1.4%), Alphabet (-2.3%), Amazon (-2.9%), Tesla (-2.7%) and Meta Platforms (-3.7%) all coming under pressure amid a sharp rise in long-term US bond yields. A jump in German Producer Price Inflation in July to fresh record highs and recent hawkish commentary from Fed policymakers was cited as behind the latest rally in US yields, which has seen the US 10-year yield push to its highest levels in nearly a month at just under 3.0%, nearly 50 bps higher versus earlier monthly lows.

Whatever the cause of the jump in US bond yields, it means that the opportunity cost of holding growth stocks (whose valuations are disproportionately based on expectations for future earnings growth versus actual earnings) increased. Unsurprisingly, the heavily big tech/growth stock weighted Nasdaq 100 was the worst performer of the major US indices on Friday, losing 2.0%.

That took its weekly losses to just over 2.4%. The S&P 500, meanwhile, fell around 1.2% on Friday, taking its weekly losses to around 1.1%, though remains comfortably above 4,200. Friday’s drop means both indices are on course to snap a four-week winning streak. The Dow, meanwhile, dipped just over 0.7% on Friday and was still trading flat on the week.

In terms of the S&P 500 GICS sectors, Energy (+0.5%), Utilities (+0.2%) and Healthcare (+0.7%) gained, Consumer Staples was flat, while the other seven all fell, led by a 2.0% decline in Consumer Discretionary stocks.

DE Falls on Weak Earnings, GM Reinstates Dividends, BBBY Slumps 40% as Cohen Dumps Shares

In terms of individual stock news; Deere’s share price drop as much as 4.0% intra-day before recovering after the company posted lower than expected earnings per share for last quarter, citing ongoing supply chain difficulties. General Motors saw its share price rally nearly 2.0% after it announced plans to reinstate quarterly dividend payments that were halted back in 2020.

Bed Bath & Beyond saw its share price tank roughly 40% on Friday following the news that billionaire investor Ryan Cohen had dumped his shares in the struggling retailer and netted a $60 million profit. BBBY shares were last trading just under $12. At earlier weekly highs of $30, BBBY had been nearly 500% up on the month, with recent price action reminiscent of the meme stock mania of early 2021.

Finally, DoorDash fell 3.0% on Friday, weighed amid the news it had axed its grocery partnership with Walmart, whose shares were last down a little over 1.0% on the day.

About the Author

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018. Joel specialises in the coverage of FX, equity, bond, commodity and crypto markets from both a fundamental and technical perspective.

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