Stocks Finish Lower as Bond Yields Rise

With the Fed preparing to raise rates several more times this year and unwind its $9 trillion balance sheet, some money managers say they worry risky assets will struggle to hold on to the momentum of prior years. Fed Chairman Jerome Powell signaled Thursday that the central bank was likely to raise interest rates by a half percentage point at its meeting next month.

Anxiety over the Fed’s projected rate-increase path helped fuel selling in Treasurys. The yield on the 10-year U.S. Treasury note jumped from 2.836% Wednesday to 2.917% Thursday, the highest level since December 2018.

The renewed push higher in bond yields put fresh pressure on the stock market. Higher rates can put pressure on stocks because they reduce the premium that investors get from holding riskier assets instead of Treasurys.

The S&P 500 fell 65.79 points, or 1.5%, to 4393.66. The Nasdaq Composite dropped 278.41 points, or 2.1%, to 13174.65, adding to losses from Wednesday after a selloff in Netflix shares led the technology sector lower. The Dow Jones Industrial Average was down 368.03 points, or 1%, to 34792.76.

Some analysts say they believe even as the Fed normalizes monetary policy, U.S. stocks still have room to run, given the strength of the economy. So far, about 80% of the S&P 500 companies that have posted earnings results for the latest quarter have beaten analysts’ expectations, according to FactSet.

“Despite so many negative macro headlines, like the Russia-Ukraine conflict, inflation, and China’s zero-COVID policy, U.S. corporate profits continue to be resilient,” said Michael Arone, chief investment strategist for SPDR at State Street Global Advisors.

Tesla shares jumped $31.58, or 3.2%, to $1,008.78 after the electric-vehicle maker reported $3.3 billion in quarterly profits late Wednesday, its highest profit to date. American Airlines Group shares rose 74 cents, or 3.8%, to $20.22 after the carrier reported that revenue more than doubled in the first quarter.

Beyond earnings, data on employment has shown the U.S. labor market is on solid footing, Mr. Arone said.

“I don’t think the rise in rates will matter too much until you see economic data fall over,” he said.

Technology shares, which tend to be sensitive to changes in interest rates, were among the worst performers in the market Thursday.

Advanced Micro Devices slipped $4.17, or 4.4%, to $89.85, while Salesforce lost $9, or 4.8%, to $177.23.

Meanwhile, oil prices rose on signs that Russian oil production is falling and Europe is moving toward putting an end to imports of Russian crude. U.S. crude-oil prices added 1.6% to $103.79 a barrel. Germany said Wednesday it would stop buying Russian oil by the end of the year.

Overseas stock markets were mixed. The Stoxx Europe 600 rose 0.3%, led by shares of travel, leisure and construction companies. France’s CAC 40 gained 1.4% after a pre-election debate in which incumbent, pro-business President Emmanuel Macron was judged by polls to have beaten far-right challenger Marine Le Pen. 

In China, shares came under pressure on concerns that Covid-19 shutdowns were slowing growth in the world’s second-largest economy. The Shanghai Composite Index lost 2.3%. Hong Kong’s Hang Seng Index fell 1.3% and Japan’s Nikkei 225 added 1.2%.

Write to Joe Wallace at [email protected] and Akane Otani at [email protected]

Corrections & Amplifications
Weekly jobless claims data are due at 8:30 a.m. ET. An earlier version of this article incorrectly said they were due at 10:30 a.m. ET. (Corrected on April 21.)