S&P 500 dips back under 4800 again as surging long-term bond yields hurt big tech and other growth stocks

The growth stock-heavy Nasdaq 100 index is sharply underperforming on Tuesday amid a sharp rise in long-term US rates.

The yield rally reflects a pumping of economic optimism that is lifting “value” and “cyclical” stocks, helping the Dow higher.in US equities on Tuesday is rotation from growth stocks into value. The tech-heavy Nasdaq 100 index, which is seen by many as a proxy for growth, has come under heavy selling pressure on Tuesday, dropping around 2.0% from around 16.5K to the 16.15K area.

And an increase in long-term interest rates is exactly what is being seen on Tuesday. US 30-year yields are up 6bps to around 2.07%, their highest level in months, while 10s are up just nuder 4bps to above 1.65% and near Q4 2021 highs. As a result, big names like Apple, which surpassed $3T in market capitilisation on Monday , is down 1.3% on Tuesday, Amazon is down 2.2%, Microsoft is down 2.4%, Alphabet is down 0.7%, Facebook is down 1.2% and Tesla is down 4.7%.

The increase in long-term yields this week which has seen US 10s rally 15bps and 30s 17bps in just two days is a reflection of a sharp increase in optimism about thefor the US economy in not just 2022, but the years beyond. That means stocks more exposed to the health of the economic cycle have been performing well. The Dow, seen by some as a proxy for so-called “value” or “cyclical” stocks as it gives a higher weighting to financial, industrial, material and energy names, is up 0.6%.

The net result for the S&P 500 is that it is down about 0.2% and trading close to the 4780 level, having printed record intra-day highs just under 4820 earlier in the session. Mixed US economic data has largely been ignored and has not been interpreted as broadly altering the prevailing narrative that the US economy is in a state of strong growth, high inflation and a tight labour market.

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